Buffett's Choice: This year, the performance of US construction stocks has even surpassed that of AI.

Compared to the eye-catching surge of AI stocks in the US stock market, the rise of construction stocks appears to be relatively low-key, with their excess returns even surpassing those of technology stocks.

According to Bloomberg, as of Thursday, the S&P 1500 Homebuilding Index has surged by 47% this year, surpassing the 41% increase of the Nasdaq index. Wall Street target prices indicate that US residential construction stocks are expected to achieve a 16% return in the next twelve months, surpassing the 13% return of the overall market and the Nasdaq 100 index, which is dominated by technology stocks.

Despite the high cost of financing at present, concerns about an economic recession are diminishing and the inventory of homes for sale is decreasing. Some real estate companies have seized the opportunity presented by the increasingly tight housing market, with M/I Homes Inc. and Green Brick Partners Inc. both doubling their performance this year.

It is worth mentioning that "stock god" Warren Buffett has once again made a successful bet. According to regulatory filings previously disclosed by Berkshire Hathaway, the company has increased its holdings in DR Horton, the largest residential construction company in the United States. In June of this year, Buffett also purchased two other builders, Lennar and NVR.

Michael Rehaut, an analyst at JPMorgan Chase, pointed out that residential construction stocks will continue to benefit from a solid fundamental outlook. If there is no major economic recession while interest rates remain stable, we expect strong growth in both the balance sheet and book value over the next two years.

Furthermore, the rise of residential construction stocks has not led to overvaluation. In fact, the market conditions on Monday of this week were closer to oversold. At the same time, the latest data shows an unexpected increase in pending home sales in the United States in July, bringing a glimmer of vitality to the previously sluggish existing home market.

However, Kieran Clancy, Senior US Economist at Pantheon Macroeconomics, believes that pending home sales will be restrained until mortgage rates decline significantly. In a note to clients, he stated that this situation is not expected to occur until later this year or early next year.