Homebuilder stocks have lagged far behind the broader market during Wall Street’s swoon this year, weighed down by fears that rising mortgage rates could severely dampen sales.
. One prominent exchange traded fund for homebuilders has fallen about 26% this year, while the S&P 500 is down just 5%. One prominent exchange traded fund, the SPDR S&P Homebuilders ETF, is down about 26% this year, and many of the biggest homebuilders are down even more. Meanwhile, the benchmark S&P 500 is down just 5%.
The average rate on a 30-year mortgage rose this week to 4.67%, according to mortgage buyer Freddie Mac. A year ago, it stood at 3.18%. Recent data suggest the spike in rates has taken a bite out of new U.S. home sales, which slipped 2% in February from a month earlier to a seasonally adjusted annual rate of 772,000 homes. It was the second monthly decline. Sales were down 6.2% from a year ago.In a research note this week, analysts at Bank of America Securities said homebuilder valuations are now trading at the low end of the historical range, making the stocks attractive.
“Simply put, there is a shortage of shelter and the cost to own is still relatively attractive versus renting in the fastest growing U.S. markets,” the analysts wrote.
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