Homebuilders Crushed Despite Strong Sales (TOL) (PHM) (KBH) (DHI)
Existing homes sales data released on Thursday morning showed May sales totaled 5.18 million. This was ahead of consensus of 5 million and 4.2% higher than April sales. Sales levels reached their highest level since November of 2009. The data is clearly a positive, however, it may be too soon to know if higher mortgage rates have impacted the market, thinks Wells Fargo.
"Existing home sales is a lagging indicator and likely reflects agreements put in place in March or April when mortgage rates had yet to begin to increase. Therefore we believe it may take 1-2 more months before we can tell if demand has been impacted by higher mortgage rates (the 30-year average fixed rate mortgage is up approximately 65 bps since the end of April)," said analyst Adam Rudiger of Wells Fargo.
Importantly, despite positive housing data, homebuilder stocks suffered huge losses on Thursday. Shares of Toll Brothers Inc. (NYSE: TOL), Lennar Corp. (NYSE: LEN), PulteGroup, Inc. (NYSE: PHM), KB Home (NYSE: KBH), Hovnanian Enterprises Inc. (NYSE: HOV) DR Horton Inc. (NYSE: DHI) and Beazer Homes USA Inc. (NYSE: BZH) all moved lower. The decline is tied to a spike in U.S. bond yields as a result of Fed tapering news on Wednesday. Investors likely anticipate higher mortgage rates going forward.
For an analyst ratings summary and ratings history on PulteGroup click here. For more ratings news on PulteGroup click here. Shares of PulteGroup closed at $20.76 yesterday, with a 52 week range of $9.02-$24.47.
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