Tech stocks are no match for this! Wall Street predicts that the US real estate construction industry will continue to thrive in the next 12 months.

According to Dolphin Research, the growth of the US housing construction sector this year has even surpassed the technology boom driven by artificial intelligence. Analysts predict that this strong performance may continue.

Wall Street's price targets indicate that the expected return potential for US real estate developers in the next 12 months is 16%, surpassing the 13% of the broader market and technology stocks represented by the Nasdaq 100 index. In 2023, the stocks of construction companies soared by 47%, already exceeding the 41% increase in the Nasdaq index.

So far this year, the stock prices of MI Homes (MIHO.US) and Green Brick Partners (GRBK.US) have more than doubled. Although high interest rates have hindered the sales of second-hand homes for decades, concerns about an economic recession are diminishing, and analysts are optimistic about the earnings prospects of real estate developers.

Michael Rehaut, an analyst at JPMorgan Chase, wrote, "Assuming interest rates remain stable and unless there is a moderate or large economic recession, we expect book value to grow steadily and financial conditions to be very healthy. Real estate construction stocks should continue to benefit from a solid fundamental outlook."

Currently, Cavco Industries (CVCO.US), which manufactures RVs and mobile homes, has the highest expected return, followed by Meritage Homes (MTH.US), Tri Pointe Homes (TPH.US), and industry giant D.R. Horton (DHI.US). It is worth noting that luxury home builder Toll Brothers (TOL.US) released its third-quarter earnings report last Tuesday, with 20 analysts predicting an average return of approximately 14% for the company. Despite the continuous rise in its stock price, it is still not severely overvalued. On Monday, the group's 14-day RSI index approached oversold territory for the first time in nearly a year, and the stock rebounded for three consecutive trading days.

On Wednesday, data showed that the number of contracts signed for the purchase of existing homes unexpectedly rose for the second consecutive month in July. However, this rebound is still not enough to convince potential homebuyers that the second-hand housing market is improving.

According to Kieran Clancy, Senior US Economist at Pantheon, existing home sales will remain sluggish until later this year or early next year, until mortgage rates drop significantly. Meanwhile, real estate developers continue to offer incentives to alleviate the economic burden of rising interest rates.

Anthony Pettinari of Citigroup expects that if interest rates continue to rise, real estate developers will sacrifice prices while increasing incentives to maintain growth. Furthermore, he also stated that as long as interest rates remain high, rate cuts may still be a key pricing strategy for developers.