With U.S. 30-year mortgage rates nearing 7% and affordability weighing on homebuying demand, a Motley Fool contributor says he would be eager to buy NVR and Dream Finders Homes if rates fall. Their gross margins were 19.2% and 14.2%, respectively, last quarter.
NVR uses an asset-light land-option model, contracting for building lots rather than buying them outright, and has reduced its shares outstanding 32% over 10 years through repurchases. Its stock is 36% below its high, and operating profit has fallen to $1.2 billion from a peak above $2 billion. Dream Finders has also used land options and expanded through acquisitions across the Sun Belt and Atlantic coast; its stock is 72% below its high, with $4 billion in revenue over the past 12 months.
The article says estimates put the salary needed to afford the U.S. median home at about $110,000, while high rates and prices have pushed builders to cut prices to maintain sales. The writer argues that if rates ease, both companies could preserve higher prices and improve margins and cash flow, potentially lifting their shares over five years. The writer disclosed no position in either stock; The Motley Fool says it owns and recommends both.
