The Barratt Developments (LSE: BDEV) share price was hammered in the stock market crash, as you’d expect. Housebuilders are always hit hard when markets fall. It was the same after the Brexit referendum shock in June 2016. The sector fell faster than most on the FTSE 100.
The housing market is on the front line of the economy. With the UK heading into recession due to Covid-19, the big builders face fewer sales at lower prices.
Despite this, I’m a fan of the housebuilding sector. Britons love bricks & mortar and are hungry to buy when they can afford it. Demand has outstripped supply for years. Land is limited, but the population isn’t, and that looks set to continue. Dividends have been generous (until lately).
Take your opportunities
The sharp drop in the Barratt share price looks like a buying opportunity to me, if you plan to hold for the long term. Its stock is down more than 40% from its January peaks, despite climbing 10% in the last month.
This means those who buy Barratt stock today are getting in at a relatively low valuation. If you’re looking to build a million-pound portfolio for your retirement, then it pays to buy bargain stocks when you can.
I don’t expect the housing market to race away. Especially if we get a second wave of the pandemic and have to go back into lockdown. However, I’m encouraged to see the government opening up the sector again.
The Barratt share price picked up last week, as it began a phased return to housebuilding on 11 May at roughly half of its locations. From Thursday, it will open a limited number of sales offices to customers, on an appointment basis.
Inevitably, potential buyers will be wary. Many will be pushing for discounts, having seen alarmist headlines suggesting house prices could fall 20% this year. Others will have lost their jobs and be in no position to buy.
Whether you think the Barratt share price is a ‘buy’ today will partly depend on how you view the recovery from here. It is clearly going to be bumpy. But that’s why you’re able to buy the UK’s biggest housebuilder at a knock-down price.
I’d buy the Barratt share price today
Barratt doesn’t pay a dividend right now. Nor is there financial guidance to rely on, as management pulled that too. The Barratt balance sheet is relatively healthy though, with £426.7m of net cash at the end of 2019. Covid-19 will eat into that, but it started in a strong position.
Britain needs housebuilders. If you plan to hold for the long term, the Barratt share price looks like a buy to me. It could be another building block in your aim to make a million and retire in comfort.
