Despite Denial, Homebuilder Stocks Track Bonds (XHB)
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With bond yields surging this morning, no group may be more attentive to the change than homebuilders.
While numerous homebuilders have been resolute that buyers will continue to stream in despite the rising rates, they know in the back of their minds that the rising interest rates do pose a real potential problem. Not only do rising rates threaten affordability, but some signed deals may fall trough as buyers may not be able to qualify for mortgages at the higher rates. Also, rising yields threaten the move-up part of the market. Home owners that have been getting closer to above-water on their underwater mortgages may find slower home price appreciation dampens their hopes to sell and move up.
Last week's purchase mortgage application data illustrates the worry. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. Still, on an unadjusted basis, it is up 12 percent from last year.
While homebuildering execs today would be quick to blow-off suggestions that the rising rates could slow down the recovery, their stocks are telling a different story. The sector is lower across the board, with sector ETF SPDR S&P Homebuilders (NYSE: XHB) down 1.3%.
Looking at individual names: Lennar Corp. (NYSE: LEN) down 4%, KB Home (NYSE: KBH) down 3.9%, DR Horton Inc. (NYSE: DHI) down 3.6%, Toll Brothers Inc. (NYSE: TOL) down 3.5%, PulteGroup, Inc. (NYSE: PHM) down 3.1%, Beazer Homes USA Inc. (NYSE: BZH) down 2.7%.
While numerous homebuilders have been resolute that buyers will continue to stream in despite the rising rates, they know in the back of their minds that the rising interest rates do pose a real potential problem. Not only do rising rates threaten affordability, but some signed deals may fall trough as buyers may not be able to qualify for mortgages at the higher rates. Also, rising yields threaten the move-up part of the market. Home owners that have been getting closer to above-water on their underwater mortgages may find slower home price appreciation dampens their hopes to sell and move up.
Last week's purchase mortgage application data illustrates the worry. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. Still, on an unadjusted basis, it is up 12 percent from last year.
While homebuildering execs today would be quick to blow-off suggestions that the rising rates could slow down the recovery, their stocks are telling a different story. The sector is lower across the board, with sector ETF SPDR S&P Homebuilders (NYSE: XHB) down 1.3%.
Looking at individual names: Lennar Corp. (NYSE: LEN) down 4%, KB Home (NYSE: KBH) down 3.9%, DR Horton Inc. (NYSE: DHI) down 3.6%, Toll Brothers Inc. (NYSE: TOL) down 3.5%, PulteGroup, Inc. (NYSE: PHM) down 3.1%, Beazer Homes USA Inc. (NYSE: BZH) down 2.7%.
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