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Summary
- Record housing shortages, backlog conversions, and spiking real estate prices have led to major upside for some companies in the housing market.
- Last year, REITs were a top-performing sector (+46.2%). However, this year, in the face of rising interest rates, sectors such as real estate are cooling off.
- Despite market uncertainty and headwinds amid rising mortgage rates, some housing stocks are a top choice among investors, offering solid valuations, strong growth rates, and profitability metrics.
- Notably, in a stagflationary environment, some housing stocks can serve as an inflation hedge. Along with solid fundamentals, based on our Quant Rating system, our top 3 housing picks are strong buy recommendations.
Can Investing in Housing Stocks Fight Inflation?
Concerns surrounding a slowdown in economic growth, decades-high inflation, and market volatility is prompting investors to hedge their bets on the right investments. Finding undervalued companies that are high quality and deliver attractive returns and the prospect of future earnings offer benefits sought by investors. And while it may seem counterintuitive with mortgage rates reaching 13-year highs of 5.64%, some housing stocks have outperformed most industries throughout COVID-19 and post-pandemic, offering portfolio diversification.
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