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With rates on the rise, here's how to play housing: Analysts

The recent pullback in housing stocks has created opportunity for investors to buy on weakness, market analysts told CNBC on Monday, and some individual names stand out from the pack.


Jack Micenko, home builder analyst at Susquehanna Financial Group, told "Squawk on the Street" that although affordability is starting to wane, the cost of owning a home is still near "multigenerational lows" and that nationwide, owning a home is 30 percent cheaper than renting on on a monthly basis.

After a "major" selloff in the housing sector, Micenko said that right now investor expectations have been reset and they are picking through the sector to find value. "The stocks aren't terribly expensive now," he said. "The recovery is still in play. I just think it's a question of slope and how steep we go."

(Related: Home builders buoyed by buyers)

Micenko added that there are several "natural headwinds" negatively affecting sentiment for first-time homebuyers, such as rising student debt and mortgage finance availability. As a result, he said, the sector is focused on homeowners looking to upgrade.

With this, Micenko suggests Toll Brothers and Taylor Morrison, which he likes in part because of land inventory the companies own.

(Related: Mortgage rate spike finally hits housing)

Daniel Oppenheim, home builder analyst at Credit Suisse, suggests that investors focus on companies with limited exposure to a rise in interest rates. He suggests names like WCI Communities, Toll Brothers, Standard Pacific and William Lyon Homes, which are less focused on first-time buyers and have more exposure to high-end properties and cash buyers.

In an environment of rising interest rates, Oppenheim said that things should pick up in the fall, after a "modest" pause as the market digests a higher cost of borrowing.

—By CNBC's Paul Toscano. Follow him on Twitter @ToscanoPaul and get the latest stories from "Squawk on the Street"

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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