If it was somehow connected to the homebuilding sector—from construction to construction supplies to even home retail—chances are it was up today. Several different stocks across several different sectors with only that “home” theme to unify them all gained ground in Tuesday afternoon’s trading, and the reason might surprise you.
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It all started when the iShares U.S. Home Construction ETF (ITB) added 2.6% in trading. That was well ahead of the S&P 500’s gains on the day and also put the ETF on track for the best day it had seen in weeks. That started a cascade of other home-related stocks that also saw gains. Beazer Homes (NYSE:BZH) led the way, adding nearly 6.5% at one point, followed by Jeld-Wen Holding (NYSE:JELD), who tacked on 5.21% at one point. Not too far behind came Lennar (NYSE:LEN), which added nearly 4%. But two of the biggest winners were real estate selling tools: Opendoor Technologies (NASDAQ:OPEN) added nearly 15%, and even Offerpad Solutions (NYSE:OPAD) added over 6.7% in the afternoon.
A combination of factors worked together to send all these stocks and funds upward, starting with an impressive report about homebuilding in America. Home prices posted an increase that was stronger than expected. That’s actually odd, given the state of interest rates and the fact that we just came off a multi-year run-up. Interest rates weren’t likely to see much help any time soon, either; the recent pause is considered somewhat temporary by Comerica chief economist Bill Adams, who looks for rising housing prices to be a good enough reason to continue hiking interest rates.
Yet, here’s the interesting part: out of all five of those stocks listed, only one has upside potential. Lennar, a Moderate Buy, comes with 4.33% upside potential thanks to its average price target of $131.50 per share. Meanwhile, Offerpad, the second biggest gainer today and also a Moderate Buy, boasts the biggest downside risk at 57.07% thanks to its average price target of just $4.40.
