U.S. homebuilder stocks outperformed the S&P500 last year and ended 2023 at near-record-highs even as interest rates remained elevated, and a financial expert says he sees more of the same in 2024.

Tyler Batory, executive director of equity research at Oppenheimer & Co., told BNN Bloomberg that despite falling mortgage rates, he still expects there to be limited turnover in the existing U.S. housing supply, creating more demand for new homes.

“The theme in terms of limited existing inventory in 2023 given how elevated mortgage rates were, we think that still plays out in 2024,” Batory said in a Thursday television interview.

“Yes, mortgage rates have come down but there’s still a significant gap right now between the prevailing mortgage rate and where a lot of folks have a mortgage and have a home.”

Batory recommended PulteGroup, Inc. (PHM, NYSE), Toll Brothers, Inc. and Builders FirstSource (BLDR, NYSE) as his top picks in the homebuilder sector.

Neither Batory, his family, his clients nor his firm hold shares of the stocks listed above. None of the companies mentioned are investment banking clients at his firm.

For the full interview, click on the video at the top of this article.