Breaking News
0

What's Worrying Housing Industry Despite Low Mortgage Rates?

By Zacks Investment ResearchStock MarketsJun 18, 2019 08:56AM ET
www.investing.com/analysis/whats-worrying-housing-industry-despite-low-mortgage-rates-200432462
What's Worrying Housing Industry Despite Low Mortgage Rates?
By Zacks Investment Research   |  Jun 18, 2019 08:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Confidence among homebuilders in the United States weakened in June as construction costs and labor concerns crept up. U.S. home builder confidence fell two points to 64 in June from the previous month, as measured by the National Association of Home Builders’ index. Notably, this is the first decline this year, indicating that lower mortgage rates are failing to give the housing market a sustained boost.

Precisely, all three Housing Market Index components fell marginally in June. The index gauging current sales conditions fell one point to 71 points, while buyer traffic slipped from 49 to 48. Additionally, expectations for the next six months dropped from 72 to 70 points.

“While demand for single-family homes remains sound, builders continue to report rising development and construction costs, with some additional concerns over trade issues,” NAHB Chairman Greg Ugalde said.

Mortgage rates have been declining since November 2018, and hit the lowest level in two years this month, which should have provided a major boost to the rate-sensitive housing market. Last week, interest rates on U.S. 30-year, fixed-rate mortgages remained at 3.82%, their lowest levels since September 2017, Freddie Mac said. Then again, homebuilders are complaining about the dearth of affordable, entry-level homes in the market.



Rising Costs: A Major Impediment

Builders remain perturbed by rising development and construction costs, and trade issues. Although new home sales advanced in March and April, builders continue to worry about excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability.

Given the scenario, elevated home prices posed a major challenge to entry-level buyers considering the income level. Peter Boockvar, chief investment officer at Bleakley Advisory Group, noted that lower mortgage rates have not been enough “to offset years of 5-6% home price gains in enticing first-time buyers to buy instead of rent.”

Home values in the United States have increased 6.1% over the past year and Zillow expects it to increase 2.8% in another year.

Is Housing on Shaky Ground?

Stocks in the homebuilding industry have outperformed the broader market year to date. The SPDR S&P Homebuilders (NYSE:XHB) ETF XHB has risen 29.2% in 2019 compared with 14% gain in the S&P 500. Shares of leading homebuilders such as PulteGroup (NYSE:PHM) , KB Home (NYSE:KBH) , D.R. Horton Inc. (NYSE:DHI) and Lennar (NYSE:LEN) have surged 25.7%, 37.2%, 32.6% and 35.4%, respectively, so far this year.



Improving economic conditions, rising disposable income and favorable demographic changes are continuing to support demand.

According to Freddie Mac’s June forecast, although house price is expected to grow 3.6% in 2019, home sales could reverse the 2018 slump and come in stronger at 6.03 million this year and increase to 6.19 million in 2020.

Meanwhile, new data on May housing starts and building permits — scheduled to be released on Jun 18 by the U.S. Census Bureau and Department of Housing and Urban Development — will throw light on the housing market.

The U.S. new-home construction is expected to rise for the third consecutive month in May. Housing starts registered 5.7% gain in April. Permits, which precede future construction, are also expected to increase 0.1% to a 1.297 million annualized rate.

Despite June’s drop in builder confidence, we are hopeful about the industry given solid housing demand (mainly for single-family construction), upbeat economic growth and continued job creation. Builders remain equally hopeful for the upcoming months given solid demand. Notably, the index remained within a band of low to mid-60s over the past five months. It is to be noted that any reading above 50 indicates that more builders expect sales conditions to be good rather than poor.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>



PulteGroup, Inc. (PHM): Free Stock Analysis Report

Lennar Corporation (LEN): Free Stock Analysis Report

D.R. Horton, Inc. (DHI): Free Stock Analysis Report

KB Home (KBH): Free Stock Analysis Report

SPDR S&P Homebuilders ETF (XHB): ETF Research Reports

Original post
What's Worrying Housing Industry Despite Low Mortgage Rates?
 

Related Articles

What's Worrying Housing Industry Despite Low Mortgage Rates?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email