Builder stocks are falling figuratively and in fact, as labor and material costs rise, interest rates continue ticking up, and demand weakens.
According to trading analyst Jack Micenko, the “biggest concern is rising rates in conjunction with higher prices,” as the market anticipates that poor affordability will continue to drive down demand. Existing home sales have peaked, also adding to what is considered overall as a "fairly tepid" housing recovery, Bloomberg reports. Mortgage guarantor Freddie Mac forecasts, “Although the U.S. economy and job market are firing on nearly all cylinders ... Weaker affordability, builder constraints, and ongoing supply and demand imbalances over the summer resulted in fewer home sales and less home construction compared to earlier this year.”
The housing market is stalling, and homebuilder stocks are feeling the pain. The S&P Supercomposite Homebuilding Index is down 21 percent year-to-date, on track for the biggest annual drop since 2008, when it fell 32 percent. That’s even with tax cuts, unemployment near the lowest since 1969, and a real-estate developer in the White House. What gives?
