Home-Builder Stocks Are Sitting Pretty
October 02 2019 - 1:28PM
Dow Jones News
By Jessica Menton
Shares of home builders were a relative bright spot Wednesday in
a sea of red in the stock market.
Lennar Corp. was among the best performers in the S&P 500
after the company delivered stronger-than-expected third-quarter
earnings and reported an increase in orders and deliveries.
"We continue to believe the basic underlying housing market
fundamentals of low unemployment, higher wages and low inventory
levels remain favorable," Chairman Stuart Miller said in prepared
remarks.
Shares climbed as much as 3.6% to $57.74, putting the stock on
pace to close at a fresh 52-week high. That compares with the
broader S&P 500's 1.8% decline.
Home-building companies have rebounded this year after concerns
about a weak housing market and a downturn in economic growth
weighed on those shares last year. NVR Inc. and PulteGroup Inc. are
also hovering around 52-week highs. Both stocks fell about 1%
Wednesday but are up 51% and 38%, respectively, this year.
Investors have taken a second look at the group after the
Federal Reserve lowered interest rates in July for the first time
in a decade. The move helped ease mortgage rates, which have given
home buyers an incentive.
A decline in rates has also helped the housing market remain
strong amid renewed worries about slowing global growth. Weak
readings this week on manufacturing activity and private-sector job
growth have revived concerns about the U.S. economy.
Still, some analysts expect that home builders will continue to
benefit from improving home sales and housing construction as home
buyers look to refinance. Recent housing data has pointed to a
firming housing market. Home building in the U.S. rose in August to
the highest level since June 2007, the Commerce Department said,
while pending home sales rebounded.
Mortgage rates are expected to remain low for the foreseeable
future, according to Freddie Mac. Last week, the average U.S. fixed
rate for a 30-year mortgage -- which dropped to a three-year low in
August -- fell to 3.64%, Freddie Mac said Thursday. That's down
from 4.7% a year ago.
The mortgage-finance company forecasts the 10-year U.S. Treasury
yield will average 1.8% in 2020, down from an annual average of
2.1% in 2019. The 10-year yield settled at 1.651% Tuesday.
Continued improvement in the sector could give home-builder
stocks more room to run, some analysts and investors say.
"The macro backdrop has rebounded, as starts are set to turn
positive, inventory growth has moderated and affordability has
improved, which in turn should allow the housing recovery to
resume," analysts at JPMorgan Chase & Co. said in a note.
Write to Jessica Menton at Jessica.Menton@wsj.com
(END) Dow Jones Newswires
October 02, 2019 13:13 ET (17:13 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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