Key Highlights:

  • “Bracing for the inevitable” due to COVID-19, Bank of America cut ratings and price targets on some homebuilding stocks and building products companies
  • B of A still “positive” on homebuilders stock due to high demand pre-COVID-19
  • First-time homebuyers hit highest volume in two decades pre-cOVID-19

The Bank of America (BofA) just announced ratings cuts and lower price targets on some homebuilder stocks and building products companies. Within this market segment, here are some stocks affected by these new ratings:

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  • Lennar Group cut from “buy” to “neutral
  • NVR cut from “buy” to “neutral”
  • Toll Bros cut from “buy or neutral” to “underperform”
  • Foundation Building Materials, Inc. cut from “buy or neutral” to “underperform

The only homebuilding stock earnings forecast raised by BofA from “neutral” to “buy” was KB Home. BofA sees KB Home as a “substantial offering” that, in a few months will provide a relative degree of “resiliency” to the overall housing market but particularly to first-time buyers.

Remember that first-time buyers have taken advantage of low interest rates prior to the coronavirus to the tune of hitting its highest volume in 20 years.

The BofA continues its positive outlook on homebuilding stocks because of what was, pre COVID-19, strong demand. BofA commented. “However, we believe overall demand is likely to at least pause given COVID-10…additionally, there is a potential carry-on effect for labor availability.”

No doubt, BofA’s downgrades will put even more pressure on homebuilding stocks as the coronavirus continues to rattle the broader housing market. That rattling has caused the stock market to plunge into a bear market with the recent top of the Dow fell under 20,000 for the first time in three years.

 

Thanks to National Mortgage News and Paul Centopani.

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