MGIC Investment Corp. and Radian Group Inc. jumped in New York trading after Goldman Sachs Group Inc. recommended investors buy the shares, citing the potential for sales growth amid an improving housing market.

MGIC advanced 2.4 percent to $8.29 at 4:03 p.m. after the stock was called a “top idea” by Goldman Sachs. Radian gained 1.1 percent. MGIC has tripled this year, and Radian has more than doubled. Goldman Sachs set a $10 price target for MGIC and said Radian can reach $17 in the next 12 months.

Mortgage insurers “have one of the strongest secular growth stories among all financials,” Goldman Sachs analysts Eric Beardsley and Rachel Meyers said Thursday in a report. “Their pace of credit improvement is underestimated by the market.”

Home prices in 20 cities rose 13.3 percent in the 12 months through September, the most since 2006, according to the S&P/Case-Shiller index. That helped MGIC and Radian, which cover losses when homeowners default and foreclosures fail to recoup costs. The U.S. economy expanded at a 3.6 percent annualized pace in the third quarter, the fastest in more than a year, according to Commerce Department figures.

MGIC and Radian raised cash from investors this year to replenish capital drained when housing crashed. Essent Group Ltd., a mortgage insurer started after the financial crisis, has rallied about 30 percent since an initial public offering in October.

Essent, which counts JPMorgan Chase & Co. and Goldman Sachs among its investors, was rated neutral in Thursday’s report. The insurer slipped 0.4 percent.

Mortgage REITs

Private mortgage insurers can expand sales as U.S. government entities led by the Federal Housing Administration raise prices and retreat from the market, according to the report. Increased government oversight of mortgage lending will limit risks tied to shoddy lending in the future, the analysts said.

Annaly Capital Management Inc. dropped 1.9 percent and American Capital Agency Corp. declined 1.5 percent after the Goldman Sachs analysts said investors should sell the mortgage real estate investment trusts. The REITs will fall as the Federal Reserve scales back purchases of mortgage bonds and interest rates rise, according to the report.

(With assistance from Roger Neill in London. Editors: Dan Kraut, Steve Dickson)