Advertisement
Singapore markets closed
  • Straits Times Index

    3,184.91
    -38.03 (-1.18%)
     
  • Nikkei

    39,098.68
    +836.48 (+2.19%)
     
  • Hang Seng

    16,725.86
    -17.09 (-0.10%)
     
  • FTSE 100

    7,706.28
    +21.79 (+0.28%)
     
  • Bitcoin USD

    51,245.87
    +181.18 (+0.35%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,088.80
    +1.77 (+0.03%)
     
  • Dow

    39,131.53
    +62.42 (+0.16%)
     
  • Nasdaq

    15,996.82
    -44.80 (-0.28%)
     
  • Gold

    2,045.80
    +15.10 (+0.74%)
     
  • Crude Oil

    76.57
    -2.04 (-2.60%)
     
  • 10-Yr Bond

    4.2600
    -0.0670 (-1.55%)
     
  • FTSE Bursa Malaysia

    1,549.11
    +3.62 (+0.23%)
     
  • Jakarta Composite Index

    7,295.10
    -44.54 (-0.61%)
     
  • PSE Index

    6,913.21
    +10.06 (+0.15%)
     

Homebuilder stocks feeling the heat after rising rates

The current interest rate environment is driving mortgage rates higher, which in turn are having their own effect on homebuilder stocks, such as D.R. Horton (DHI), Lennar (LEN), and PulteGroup (PHM). Many stocks across the homebuilding sector have been noted to be in a downturn since the Federal Reserve's rate pause last week.

Yahoo Finance's Jared Blikre joins the show to break down how these stocks are performing amid elevated volatility.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

JULIE HYMAN: Well, the rising rate environment driving mortgage rates above 7%. And while low inventory has supported homebuilder stocks, the reality of high rates is now weighing on shares. Jared Blikre is down on the floor right below us with details on this. Jared.

JARED BLIKRE: Hi, Julie. There are some strange things going on in the market. To your point earlier in the show, this is what's happening on the Wi-Fi Interactive today in the homebuilders market. And you can see some red, some green there. But it's pretty clear, over the last seven days, lots of dark red here. Most of these tickers down about 5% like Toll Brothers, Lennar. DHI as well.

And this includes that federal reserve meeting where we saw interest rates shoot higher. This is a 10-year-- this goes back to Wednesday last week. And you can see, from that meeting to here, we have risen quite a lot. And I think all of this will make a lot more sense if we look at the 30-year mortgage rate, which I have right here in cyan along with XHB. And that is the S&P-- that's the S&P homebuilders market.

So here, we had these low rates in 2020, 2021. We saw this huge rise in XHB. Lots of fundamental reasons for that over the pandemic. Lots of people moving their residences. Then we saw an inverse relationship take hold, where we saw these rising rates-- 1, 2, 3. And then 1, 2, 3. We saw the opposite reaction in the homebuilders.

And then on this latest spurt up in the homebuilders, that was done actually with rising rates here. Why would that be? I think it's because we've put in this top here, and then we backed off of it. And we didn't really see XHB. We didn't see the homebuilders take a hit until we broke to new highs. And that was very recently, actually about a month or two ago in this market that we're looking at.

So I'm going to go back to our heat map. And I'm going to show the price action. This is over the last seven days. I want to show what's happened over the last month, because it gets even worse there. Here's two months. And you can see the drops from those highs. DHA-- DHI down about 15.8%.

And just to your point, Julie, on the strange things going on in this market, when we have a market where one thing goes up and the other thing is supposed to go down, doesn't always happen on a daily basis. But you take the price action and the overall indices today. They seem to have gone up in the middle of the day-- in the middle of the day, retracing all their losses for no rhyme or reason.

It's because of the enhanced volatility in the market. It gets into short gamma, really in the weeds. I'm not going to go there. But just to say that things are a bit more volatile and hinky than they have been in several months. So probably more of the same into the end of the month.

JOSH LIPTON: All right. Thank you, Jared Blikre, for bringing us all the action from the floor of the NYSE.