Toll Brothers (NYSE:TOL) CEO Douglas Yearly recently discussed how how his company saw the need to cater to first-time home buyers despite the fact of his company’s reputation for serving the high-end, $1 million-plus home buyer. The move to attract first-time home buyers has made Toll Brothers popular amongst homebuilder stocks. Its shares are up 41% last year. 

When I analyze homebuilders and their businesses—believe me, it’s not very often—I’m like every other investor. I’m asking about average selling price, backlog, homes closed or delivered, net new orders, etc. I’m probably also looking at geographic performance, land development, etc. 

I’m not sure I’ve spent too much time worrying about first-time homebuyers, although I do consider buyer demographics. 

However, since homes have gotten so expensive, both new and resale, I’ve generally assumed, wrongfully as Yearly would suggest, that first-time buyers are an insignificant piece of Toll’s business. 

And maybe they are but there’s an old adage that it’s not the sale you make today with a customer, it’s the lifetime value of that relationship that counts. 

Here are three homebuilder stocks to buy to capture first-time homebuyers. 

Landsea Homes (LSEA)

Landsea Homes (NASDAQ:LSEA) is a Dallas-based homebuilder that began building homes in 2014. It specializes in entry-level and move-up price points in five states: Florida, Texas, Colorado, Arizona and California.   

“While we have construction expertise across a wide array of product offerings, as noted above, we are focused on entry-level and first-time move-up homes. We believe our high concentration in entry-level homes helps position us to meet changing market conditions and to optimize returns while strategically reducing portfolio risk,” states its 2023 10-K. 

Of the five markets it’s in, Florida is the biggest, and it happens to be all about entry-level and move-up buyers. The average selling price of its net new orders at the end of 2023 in Florida was $442,000, about 23% lower than its overall average of $571,000. The average selling price in Arizona is even lower at $427,000. It’s also mostly entry-level buyers.

Everything about its business looks good except its profitability. 

In the first quarter, its adjusted EBITDA was $17.0 million on revenue of $294.0 million, a margin of just 5.8%. It’s easy to understand why its stock is down over 30% in 2024. 

However, given it has a book value per share of $17.92, its shares are trading at 49% of its equity. Aggressive investors ought to be interested.This is one of the top homebuilder stocks on the market.

LGI Homes (LGIH)      

Also in Texas, LGI Homes (NASDAQ:LGIH) announced July 3 it closed 571 homes in June and 1,655 in the second quarter. As of June 30, it had 128 active selling communities. 

LGI focuses on the entry-level homebuyer in 21 states including Texas, Georgia, and Florida. Founded in 2003, it’s built and sold over 65,000 homes in the past 21 years. 

In the first quarter ended March 31, LGI reported home closings of 1,083, an average selling price of $360,897, and a backlog of 1,335 homes valued at $520 million. Despite a 19.8% decline in home sales revenue in the quarter, to $390.9 million, it still managed to earn $17.1 million in the quarter, a net margin of 4.4%. 

Of the five operating regions, its top revenue generator was the Southeast at $116.4 million, despite an average selling price of $328,014, $32,000 below the overall average. Its book value as of March 31 was $79.31 a share. Its share price is 1.11x its current book value.   

Down 33% year-to-date, it’s another value play in the first-time buyer space. 

Century Communities (CCS)

Century Communities (NYSE:CCS) operates in more than 45 markets and 18 states in the U.S. Based in Colorado, it focuses on the entry-level segment so it can attract as many customers as possible. In Q1 2024, 94% of its total home deliveries (2,358) were entry-level buyers.  

Founded in 2002, it has delivered 21 consecutive years of profitability. Through March 31, its latest 12-month revenue and net income was $3.9 billion and $290 million, respectively. That’s the highest margin of the three companies in this article.   

It operates two brands: Century Communities and Century Complete. The former offers homes across a variety of prices, while the latter focuses entirely on entry-level buyers.  

Of the 75,089 lots in its inventory, 42% are owned, while 58% are controlled, making it a more asset-light business model. Century Complete accounts for 23% of those lots.

Over the past five years, Century has grown its net income and revenue by 201% and 81% respectively. Every metric you can think of is up dramatically. 

I first recommended Century in July 2021, suggesting it could see big gains in the second half of the year. I continue to view it as a good long-term buy. 

Of the three homebuilder stocks, it’s the best of the bunch. 

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.