Stocks of leading U.S. homebuilders such as D.R. Horton (DHI), Lennar (LEN), and NVR Corp. (NVR) are up on news that famed investor Warren Buffett is betting on the housing market.
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Through his holding company Berkshire Hathaway (BRK.B), Buffett opened new positions in the stocks of D.R. Horton and Lennar during this year’s second quarter. Buffett already had a long-term stake in leading American homebuilder NVR Corp.
The new positions in D.R. Horton and Lennar are a sign of confidence in homebuilders by Buffett, a legendary investor, and indications he might think the worst is over for the U.S. housing market. The housing sector has been hurt in recent years by high mortgage rates that have diminished demand for new homes, and an uncertain economic outlook.
Vote of Confidence
Buffett’s investments are closely followed by retail investors and on Wall Street, and his vote of confidence in the housing market is being taken as a bullish sign. It might be that Buffett took the stakes in DHI and LEN stocks as he anticipates the U.S. Federal Reserve will lower interest rates in coming months, which would make home ownership more affordable and boost demand.
Additionally, U.S. President Donald Trump has said he is considering removing capital-gains taxes on home sales to help bolster the national housing market. Whatever the reasons, Buffett’s purchase of homebuilder stocks has the iShares U.S. Home Construction (ITB) exchange-traded fund (ETF) trending higher.
Is DHI Stock a Buy?
The stock of D.R. Horton has a consensus Hold rating among 16 Wall Street analysts. That rating is based on six Buy, eight Hold, and two Sell recommendations issued in the last three months. The average DHI price target of $155.43 implies 5.55% downside risk from current levels.
