Homebuilders are on a roll, with the stocks rallying to the highest since January 2022, after industry bellwether D.R. Horton Inc. reported better-than-expected orders and results for the second-quarter.
The sector is making a comeback, an index tracking the industry is up 28% so far this year coming off of one of its worst years since 2018. The group fell 25% in 2022.
D.R. Horton, the nation's largest homebuilder, led the group Thursday, rising 5.6% and closing at its highest level since Dec. 31, 2021.
D.R. Horton Inc. signage stands in front of homes under construction at the Eastridge Woods development in Cottage Grove, Minnesota, U.S.
Daniel Acker/Bloomberg
"This could support a near-term wave of upward earnings revisions for the company and the group," Bloomberg Intelligence analyst Drew Reading wrote in a note. "Builders are benefiting from a lack of competitive supply and a favorable response from consumers to more aggressive pricing, which hasn't materialized in the resale market."
Industry peers Lennar Corp. and KB Home also gained hitting their highest level since early 2022, as the 10-year Treasury yield, an indicator for the direction of mortgage rates, fell to about 3.5%.
Investors continued to snap up homebuilder shares despite Thursday's existing home sales print, which slumped in March after climbing in February. The latest data could be "a sign that the spring homebuying rush may fizzle before it even gets started," Peter Essele, head of portfolio management at Commonwealth Financial Network wrote in a note.
With elevated prices and higher mortgage rates still plaguing a previously robust market, "the prospect of a recession on the horizon means the housing market is ripe for another correction," Essele warned.
The Community Home Lenders of America and the Community Associations Institute want the FHA to insure loans on condos approved by Fannie Mae and Freddie Mac.
The Federal Open Market Committee's decision to reduce interest rates for the first time in nine months lifted bank stocks Wednesday. The 25-basis-point reduction could lead to net interest income headwinds now, but loan growth later, analysts said.
Most lenders said they had already priced in the widely-anticipated decision to cut short-term rates for 30-year home loans but other products will benefit.
The deal for the Class A office building owner will be funded from Rithm's cash as well as liquidity on the balance sheets, plus possible co-investors.
The government-sponsored enterprise is making changes to mortgage-backed securities and servicing disclosure files to support use of the advanced credit score.
