Among the trends that have been cited as evidence that the housing market recovery is a reality that investors can count on are: the recently released household net worth figures indicating $3 trillion in growth for the first quarter of the year, for a seasonally adjusted $70.3 trillion; the steady rise in housing prices; and last but not least, the fairly steep decline in foreclosure inventory, a figure that was 1.1 million in April, down 24 percent from the prior year.

While inventory is down overall, demand continues apace, and more building will have to take place before  prices can come down. Residential housing construction companies could profit handsomely in the event they can step up to meet some of the demand.

The following five stocks are small and mid cap U.S. companies, all of which have analyst recommendations of “buy or better”, and have performed at decently over the past six to twelve months. Furthermore, all of these companies have price-to-earnings ratios are below the residential construction industry average of 17.20, suggesting that the shares are currently undervalued by the market.

DR Horton Inc. (DHI)—The U.S.’s largest new home builder, DR Horton has a market cap of $7.5 billion, with shares currently priced at $23.27. The stock is down 2.3 percent for the quarter, but has advanced 17.64 percent in 2013, and trades at 7.7 times earnings.

Lennar Corp. (LEN)—With a market cap of $7.42 billion and shares at $38.55, Lennar builds homes in 18 states across the country. The company has brought in $4.37 billion in sales over the last year, but the stock is down 6.84 percent for the quarter, and 0.10 percent in 2013. Over the past 12 months, however, the company has more than doubled the price of its stock, advancing 63.5 percent. Lennar is currently trading at 11.6 times earnings.

Toll Brothers Inc. (TOL)—Toll Brothers builds luxury homes in 19 states in the U.S. The company has a market cap of $5.72 billion, $2.13 billion in sales over the last year, with shares selling for $33.83. Though the stock is down more than 4 percent for the quarter, Toll Brothers has advanced 4.6 percent in 2013, and is trading at 11.75 times earnings.

Standard Pacific Corp. (SPF)—The Orange County, California-headquartered Standard Pacific builds luxury homes and communities throughout the United States. The company has a market cap of $1.90 billion, with $1.39 billion in sales over the last year. Shares are currently trading at $8.82, up 1.85 percent in the quarter, and 20 percent in 2013. The company is trading at 6.9 times earnings.

Meritage Homes Corporation (MTH)—Meritage is the smallest company in the list, with a market cap of $1.66 billion, but the company’s stock is the most expensive, closing Thursday at $46.05. With $1.33 billion in sales over the last year, Meritage’s stock is up 6.2 percent for the quarter, and 23.3 percent in 2013. The company trades at 14.5 times earnings.