W - 3 Stocks to Capitalize on the 2024 Home Sales Boom

2024-03-27 06:10:00 ET

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In 2024, the Federal Reserve has made its intent to cut interest rates crystal clear. As a result, many homeowners have started to sell their homes. That’s because, even though rates haven’t dropped much yet, mortgages can be refinanced in the future. Therefore, a high number of consumers are selling their homes and buying new ones because they are confident that rates will go down in the medium-term, which will enable them to lower their interest rates through refinancing. Indeed, existing home sales jumped a huge 9.5% last month versus January. And since I believe that the Fed is indeed going to lower rates a few times this year, I expect the number of home sales to continue to rise rapidly for the rest of this year. For investors who agree with that thought, here are three stocks for the home sales boom.

Lowe’s (LOW)

Of course Lowe’s (NYSE: LOW ) sells home-improvement products, and the demand for such offerings tends to jump when home sales accelerate. That’s because both new homeowners and those selling their houses often upgrade their residences.

Moreover, I would characterize the statements of LOW CEO Marvin Ellison on the company’s fourth-quarter earnings call, held on Feb. 27, as cautiously hopeful. Ellison reported that do-it-yourself trends rebounded in November and December before dropping sharply due to adverse weather in January. Moreover, the CEO noted that the firm’s efforts to attract more value-oriented customers enabled it to generate record Black Friday and Cyber Monday online sales.

Finally, Ellison noted that anemic home sales and elevated inflation had reduced the number of major home-improvement projects carried out by consumers. So with inflation heading downward and home sales jumping, I expect Lowe’s to benefit from a meaningful increase in the number of such projects. Given these points, I view LOW as one of the best stocks for the home sales boom.

Williams-Sonoma (WSM)

Williams-Sonoma (NYSE: WSM ) sells furniture and small appliances. Of course, when consumers move, they tend to buy large amounts of such products.

And encouragingly, WSM’s EPS rose to $5.53 last quarter versus $5.35 during the same period a year earlier, while its net margin came in at 15.6%, up significantly from the 14.5% figure that it reported for fiscal Q4 of 2023.

Moreover, showing confidence in its longer term outlook, the firm raised its annual dividend by 26% to $4.52 and authorized a new $1 billion share-repurchase program. WSM shares have an attractive EBITDA ratio of 13.66 and a signficant dividend yield of 1.45%.

Wayfair (W )

Like Williams-Sonoma, Wayfair (NYSE: W ) is a furniture retailer and should consequently benefit from the home-sales boom.

On March 25, Morgan Stanley reiterated its “overweight” rating on W stock, citing the firm’s leverage to a housing rebound and its attractive valuation. Indeed, the shares have a very low price to sales ratio of 0.6 times. The bank also likes what it sees as W’s “cost discipline.”

Also noteworthy is that the company reported its growth in Q4 was faster than the furniture sector, indicating that it’s gaining market share as its offerings are resonating with consumers.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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