Homeowners enjoying the low-interest rates they locked in during the last decade aren’t interested in selling their homes and taking on new higher rates, so homebuilders are enjoying a moment in which they are, for many buyers, the only option. Nicole Friedman reports in The Wall Street Journal:
Last year’s rapid rise in mortgage rates made home purchasing far more expensive for most buyers, slowing home sales and pressuring the home-building industry. Home builders pulled back on land acquisition and new construction.
Now, new single-family home sales are bouncing back with supply tight in the existing-home market. Active listings in March stood at roughly half of where they were four years earlier, according to Realtor.com, in part because higher mortgage rates made many homeowners reluctant to sell and give up their current low rates. (News Corp, parent of the Journal, operates Realtor.com.)
That low inventory has put home builders in a good spot. Newly built homes made up about one-third of single-family homes for sale in March, up from a historical norm of 10% to 20%.
Home-builder stocks have surged since the start of the year. The S&P Homebuilders Select Industry stock index is up 17% so far this year as of Monday’s close, outpacing the S&P 500’s 8.6% gain. D.R. Horton, Lennar and PulteGroup, the three biggest U.S. builders by volume according to Builder Magazine, have posted year-to-date stock gains of 22%, 24% and 44%, respectively.
D.R. Horton said last month that net sales orders for the quarter ended in March fell 5% from a year earlier, beating analysts’ expectations. These orders rose 73% from the prior quarter.
“The builders aren’t the only game in town, but they’re more the only game in town than they have been in a very long time,” said Carl Reichardt, a home-building analyst at BTIG.
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