Home prices will continue to rise, with repair and remodel names set to be the "sweet spot" for investors next year, analyst Bob Wetenhall told CNBC on Tuesday.
He's anticipating 5 percent growth in housing prices in 2017.
"If your home price is rising, then you're going to invest back in your house. New kitchens, new faucets, new roofs," the RBC Capital Markets homebuilding and building products analyst said in an interview with "Power Lunch."
Home prices hit a new national peak in September, according to the S&P CoreLogic Case-Shiller Index released Tuesday. Prices were 5.5 percent higher than September of 2015, up from the 5.1 percent annual gain in August.
In this environment, Wetenhall likes building products distributor BMC Stock Holdings, which he thinks can run to $22 or $25 a share, and thinks door manufacturer Masonite is "smoking hot," with "excellent valuation" and great growth prospects. He predicts it can go as high as $80 a share.
"We're dealing with a changing landscape with a lot of byproducts between what's happening in the housing market — which we like the fundamentals — as well as new policy and legislation that can change the commercial environment," said Wetenhall.
He thinks Whirlpool can hit $200 a share.
Meanwhile, homebuilders also still have a positive outlook on their market. Homebuilder sentiment held steady in November at 63 in the National Association of Homebuilders/Wells Fargo Housing Market Index. Anything about 50 is considered "positive."
Wetenhall is neutral on the homebuilders, but likes select names. He believes the sector needs to focus on the return of the first-time buyer, which accelerated this year and he thinks will continue into 2017.
D.R. Horton is the best player in the game, and understands how to cater to those buyers better than anybody, Wetenhall said.
— CNBC's Diana Olick contributed to this report.
Disclosures: RBC Capital Markets has provided BMC Stock Holdings and Masonite with investment banking services. RBC Capital Markets has provided Whirlpool with non-investment-banking-related services in the past 12 months.