Skip to main content

Homebuilder sentiment: Foundation Cracks Under Weight of Mortgage Rates

By Stephen Culp, Reuters

The mood amongst U.S. homebuilders took an unexpected dour turn this month.

The National Association of Home Builders' (NAHB) Housing Market index (USNAHB=ECI) slid five points to land at 45 - the lowest since April - defying analyst expectations that it would hold firm at a neutral 50, which is the dividing line between optimism and pessimism.

Coming on the heels of a 7-point drop in August, the residential construction sector is feeling the stress of rising mortgage rates; the average 30-year fixed contract rate has been above the 7% level since early August, and applications for loans to purchase homes are down 27.5% from a year ago, according to the Mortgage Bankers Association.

"High mortgage rates are clearly taking a toll on builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase until long-term rates move lower," writes Robert Dietz, NAHB's chief economist.

Home construction initially benefited from rising mortgage rates, which resulted in a dearth of pre-owned homes on the market and prompted a demand shift to new builds.

But amid tightening credit conditions and downbeat consumer sentiment, that particular party appears to be over.

The index "has broken sharply to the downside in the past two months as the surge in mortgage rates, and the subsequent drop in mortgage applications to their lowest level since 1995, has made homebuilders nervous," says Ian Shepherdson, chief economist at Pantheon Macroeconomics.

A current-month indicator, NAHB is among the more up-to-date housing market metrics.

But for a glimpse into where investors see the sector six months to a year down the road, look to the stock market.

Through that lens, market participants appear to be seeing a Fed pivot in their crystal balls, which should help bring borrowing costs back down to earth.

Over the last 12 months, the S&P 1500 Home Building index (.SPCOMHOME) and the Philadelphia SE Housing index (.HGX) have risen 61.0% and 43.8%, respectively, handily outperforming the broader S&P 500's 14.9% advance over the same period:
Labels:

Comments

Post a Comment

Thanks for the comment. Will get back to you as soon as convenient, if necessary.

Popular posts from this blog

California: A Model for the Rest of the Country, Part 2

Part 1 here . On Leaving the Golden State Guest Post by NicklethroweR . Posted on the Burning Platform. The fabled Ventura Highway is all that separates my artist loft from the beach where surfing first came to the United States. Both my balcony and front patio face the freeway at about eye level and I could easily smack a tennis ball right on to the ever busy 101. Access to the beach and boardwalk is very important to a Tourist Town such as mine and I can see one underpass from my balcony and another underpass from the patio. Further up the street are two pedestrian bridges. Both have been recently remodeled so that people can not use it to kill themselves by leaping down into traffic. The traffic, just like the spice, must flow and the elites that live here do not like to be inconvenienced as they dart about between Malibu and Santa Barbara. Another feature of living where I live would have to be the homeless, the insane and the drug addicts that wander this particular
Post a Comment
Read more

Proper way to calculate CAGR using T-Sql for SQL Server

After reading (and attempting the solutions offered in some) several articles about SQL and CAGR,  I have reached the conclusion that none of them would stand testing in a real-world environment. For one thing, the SQL queries offered as examples are overly complex or don't use the correct math for calculating proper CAGR. Since most DBAs don't have an MBA or Finance degree, let me help.  The correct equation for calculating Compound Annual Growth Rate (as a percentage) is:  Some key points about CAGR:  The compounded annual growth rate (CAGR) is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. Investors can compare the CAGR of two alternatives to evaluate how well one stock performed against other stocks in a peer group or a market index. The CAGR does not reflect investment risk. You can read a full article about CAGR  here .  To calculate the CAGR for an investment in a language like VB is pretty straight
Post a Comment
Read more

Top Five Consumer Cyber Security FAQs

Business, technology, environmental and economic changes are a part of life, and they are coming faster all the time. All of these changes and advancements can be distracting and make us more vulnerable to cyber scams. That's why protecting your credit is a critical part of protecting yourself from cyber security threats. Security researchers have reported that hackers and scammers are using any opportunity or vulnerability to target both individuals and companies. You may have already seen these attempts in the form of fake emails or calls. Here are the top five questions Equifax ®  has received about how individuals can protect themselves from cyber security threats and help to improve your credit protection. 1. How can I better protect my credit? Check your credit reports frequently. You can get free credit reports from the nationwide credit reporting agencies (Equifax, Experian ®  and TransUnion ® ) at annualcreditreport.com. Check your credit reports frequently to closely moni
Post a Comment
Read more