FILE- Construction workers build a new home on, March 15, 2021, in Houston. Homebuilder stocks are on a tear as investors bet that a dearth of previously occupied homes on the market and moderating mortgage rates will boost builders’ prospects in the spring homebuying season. (AP Photo/David J. Phillip, File)
LOS ANGELES (AP) — Homebuilder stocks are on a tear as investors bet that a dearth of previously occupied homes on the market and moderating mortgage rates will boost builders’ prospects in the spring homebuying season.
KB Home, PulteGroup and Tri Pointe Homes are among more than a dozen U.S. homebuilders whose stock price is up by more than 20% this year. One prominent exchange traded fund, the SPDR S&P Homebuilders ETF, is up nearly 10%. Meanwhile, the benchmark S&P 500 index is up about 7%.
“We think homebuilding stocks may be looking ahead, perhaps crossing the valley from recession to potential recovery in (the second half of) 2023,” CFRA analyst Kenneth Leon wrote in a recent research note.
Builders are coming off a lousy 2022 as mortgage rates skyrocketed to a two-decade high, sidelining many would-be homebuyers. The surge in borrowing costs after years of soaring home prices pulled the housing market into a deep slump. Sales of new U.S. homes fell about 17% last year from a year earlier to the lowest seasonally adjusted annual rate in four years, according to the Commerce Department.
At the expense of less healthy profit margins, homebuilders reduced prices and began offering incentives like covering buyers’ closing costs.
