Housing demand has been hard to forecast even as mortgage rates have declined. Just take a look at homebuilders’ quarterly results so far this earnings season.

Two of America’s largest homebuilders, Lennar (LEN) and KB Home (KBH), reported third quarter net new home orders that have fallen short of Wall Street expectations.

Net new orders represent the number of new sales contracts that have been finalized and signed by buyers minus customer home order cancellations booked for the period. Investors and analysts pay close attention to this figure because its a leading indicator for homebuilders on housing activity.

Lennar, the nation’s second-largest homebuilder, said last month that its net new orders for the quarterly period ending Aug. 31 rose 4.7% from the prior year to 20,587. That fell short of analysts’ forecasts of 20,827 orders, per Bloomberg data.

Homebuilder KB Home also reported in September that net orders for the period ending Aug. 31 were a disappointment. The builder said orders fell 0.4% from the prior year to 3,085, lower than analysts’ estimates of 3,345 orders.

Part of the reason for the misses is that it’s been hard to determine how much recent mortgage rate movements would affect buyer demand. Mortgage rates have stayed stuck between 6% and 7% this year. And in June, rates were toggling just above or below 7%.

Read more: When will mortgage rates go down? A look at 2024 and 2025.

“Maybe shame on us for not modeling it more clearly, but June and July were clearly challenging months,” John Lovallo, senior equity research analyst at UBS, told Yahoo Finance in an interview.

From a buyer’s perspective, “there was uncertainty about where rates were going. There was uncertainty about where the economy and the Fed were going, and there was growing uncertainty about the election,” Lovallo added.

The uncertainty doesn’t appear to be going away despite the Federal Reserve’s jumbo interest rate cut in September. Mortgage rates had already been on the decline as investors had bet on a rate reduction ahead.

It’s unclear how much they’ll fall. Data from Freddie Mac shows the average 30-year fixed mortgage rate jumped by 20 basis points to 6.32% last week. This marks the biggest week-over-week increase since April.

Read more: Is this a good time to buy a house?

Goldman Sachs revised its year-end forecasts in early October for 30-year conforming mortgage rates, lowering them to 6% for this year and 6.05% for 2025, down from the previous estimates of 6.5% and 6.1%.

The firm’s strategists said in the note that there’s “limited room” for major declines. They think “the decline in mortgage rates has largely run its course.”

Story continues

Lovallo warned that it’s highly likely that the other homebuilders will report misses on Q3 net orders due to rate volatility this summer. More builders are gearing up to report quarterly earnings in the next few weeks with PulteGroup (PHM) and NVR (NVR) reporting on Oct. 22 and DR Horton (DHI) on Oct. 29.

Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.

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JOHANNESBURG (Reuters) – South Africa’s former finance and labour minister and first Black central bank governor Tito Mboweni has died aged 65 following a brief illness, the presidency said late on Saturday.

Mboweni was an anti-apartheid activist as a student who later became democratic South Africa’s first labour minister from 1994 to 1999 under former President Nelson Mandela.

He then served as governor of the South African Reserve Bank for a decade from 1999, and later as finance minister from 2018 to 2021 under President Cyril Ramaphosa.

“His role in shaping our democratic future particularly during the dying days of apartheid, cannot be overstated,” said his party, the African National Congress, describing him as a trusted voice in the economic debates that framed the transition to democracy.

Mboweni helped establish the post-apartheid labour legislation that lay the foundation for collective bargaining and labour courts to uphold worker rights, the ANC said.

As central bank governor he oversaw the introduction of inflation targeting to help the bank achieve price stability.

He was a close ally of Ramaphosa and served on the ANC’s National Executive Committee, which handles party decisions.

“Given his sense of vitality and energetic and affable engagement with fellow South Africans, Dr Mboweni’s passing at 65 comes as a shock,” said Ramaphosa in a statement.

“We have lost a leader and compatriot who has served our nation as an activist, economic policy innovator and champion of labour rights.”

(Reporting by Nellie Peyton; Editing by Emelia Sithole-Matarise)

We recently published a list of 7 Cheapest Penny Stocks to Buy Now. In this article, we are going to take a look at where OppFi Inc. (NYSE:OPFI) stands against other cheapest penny  stocks.

What Does the Jobs Report Mean for the Stock Market

The Federal Reserve rate cut continues to be a hot topic for analysts especially with the new development that came in on October 4th with the Bureau of Labor Statistics releasing the job market report. One of the reasons why the Fed cut rates by 50 basis points was attributed to a weak labor market. It seems that the rate cut has worked but it also means that there might not be any urgency for the Fed to cut rates by another 50 basis points.

On October 4th Reuters reported the job market displayed significant resilience in September, with a notable increase of 254,000 non-farm payrolls and a drop in the unemployment rate to 4.1%. The United States Job gains increased the most in September when compared to the past six months. Moreover, on top of a higher than expected increase in non-farm jobs, wages also increased at a solid pace last month.

Fed Chairman Jerome Powell had already pointed out that the urgency to cut interest rates is not what the market demands at the moment. He mentioned that the committee does not feel the hurry to cut rates quickly.

These recent developments have paved the way for smooth 25 basis point cuts and also brightened the path for a soft landing scenario. In one of our recent articles on 8 Stocks Under $20 To Invest In Now, we discussed the soft landing scenario in detail and what it will mean for the stock market. Here’s an excerpt from the article:

To talk about how the market will look like after this report, Jeremy Siegel, Wharton School professor of finance joined CNBC. He pointed out an interesting fact from the jobs report. Siegel mentioned that although 550,000 new jobs were added in the third quarter, hours worked were virtually flat.

Siegel expects third-quarter GDP to be around 2.5% to 3%. Moreover, the good news for the stocks is that the current job market figures are not inflationary but rather pointing toward productivity. Professor Siegel emphasized that he never thought the second cut would be 50 basis points and vouched for a series of 25 basis points cuts each quarter. This all points towards the soft landing scenario becoming more likely.

Is There More Room for Small Caps to Rally?

Now that we know that the economy is moving towards a soft landing rather than a recession, let’s see how the small caps are expected to perform under current circumstances. To talk about the expected performance of small caps in a slowing economy, Nancy Prial, Co-CEO & Senior Portfolio Manager at Essex Investment Management recently joined CNBC for an inverview.  Prial thinks that this is the beginning of a multi-year bull cycle for small cap stocks. There are few basic underlying factors behind this claim including small caps being significantly under owned, in fact they are at record lows as a percentage of the total equity market. Moreover, the valuations of small caps are incredibly attractive and well below their large cap counterparts in the S&P 500.

Prial thinks what we really needed to turn the situation around was the Federal Reserve interest rate cuts and the confidence that the economy is moving towards a soft landing. Another significant factor that was needed is the relative earnings growth for small cap stocks. Prial quoted that the earnings growth for these stocks are expanding and expects that by the end of the year small caps will be growing faster than the large caps.

If we look at the S&P 500 EPS growth rate estimates, the market is expected to grow more than 13% year-over-year during the fourth quarter and more than 15% next year. As Nancy Prial mentioned that small caps are expected to outperform the large caps in growth, she further clarified that the overall indices might not be able to perform above 15%. However, to capitalize on the earnings growth trend, investors have to be good stock pickers as she believes there are going to be a lot of small cap stocks that will post more than 15% to 20% growth next year. Within the small cap category, Prial likes the energy sector as she thinks it will be a main player in the data center and AI industry for the years to come.

Our Methodology

To compile the list of 7 cheapest penny stocks to buy now we used the Finviz stock screener. Using the screener we got a consolidated list of stocks trading under $5, with a forward price-to-earnings ratio under 24.35 (the market’s P/E ratio as per Wall Street Journal), and with earnings expected to grow this year. Once we had an aggregated list of stocks that fit our criteria we then ranked them based on the number of hedge fund holders in Q2 2024, sourced from Insider Monkey’s database. The list is ranked in ascending order of the number of hedge funds. Please note that the share prices mentioned in the article were recorded on October 7, 2024.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

High rise office buildings used by the financial technology platform in Chicago.

OppFi Inc. (NYSE:OPFI)

Share Price: $4.47

Forward P/E Ratio: 6.01

Earnings Growth This Year: 45.10%    

Number of Hedge Fund Holders: 15

OppFi Inc. (NYSE:OPFI) is a financial technology company that enables Americans to access credit from commercial banks. It allows people to access loans and credit products through its platform, who otherwise are not eligible for traditional loans. The company offers three main programs including OppLoans, where eligible applicants can apply for loans online through a mobile-friendly platform, the TurnUp Program helps users compare various credit products in the market, lastly, the SalaryTrap which allows borrowers to repay directly from their paychecks.

When it comes to the investment case for OppFi Inc. (NYSE:OPFI) two things stand out. First is its history of profitability, the company has been generating positive net income for the past 9 years. Second, the point of attraction is its addressable market which accounts for more than 60 million Americans with no bank accounts or access to traditional banking services.

Talking about profitability, OppFi Inc. (NYSE:OPFI) posted a record second quarter during the current year. Its net income increased 53.1% year-over-year to reach $27.7 million, indicating the record second-quarter income the company has ever generated. Its adjusted earnings per share also increased 53.3% during the same time. Both net income and EPS bested management’s expectations, resulting in a raised full-year guidance by more than 20%.

OppFi Inc. (NYSE:OPFI) is trading at a discounted valuation. It is trading at only 6 times its forward earnings with analysts expecting its earnings to grow by 45% during the year, thereby making OPFI one of the cheapest penny stocks to buy now.

Overall, OPFI ranks 6th on our list of cheapest penny stocks to buy now. While we acknowledge the potential of OPFI to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.   Disclosure: None. This article is originally published at Insider Monkey.