The Federal Reserve's recent shift toward a more "patient approach" to raising interest rates has helped buoy builder stocks, but experts say that strong affordability headwinds remain in the market.
Last week, the average rate for 30-year fixed mortgages fell to the lowest rate in more than 12 months, 4.35 percent, whereas, in mid-November 2018, the rate hit a high of 4.94 percent. The OC Register says that investors are betting that more Americans will be able to buy homes in spring, but some analysts and economists say that high prices are still keeping buyers out of the market, buyers who either can't afford, or don't want to spend what the market currently calls for.
“Spring will not be as strong as last year, in part because spring last year was pretty strong, but also because homebuilders are trying to adjust price for a more cautious consumer who is concerned about price and competing with additional inventory,” said Carl Reichardt, managing director and homebuilding analyst at BTIG.
Big builders that have taken steps in recent years to build more communities priced for first-time buyers are likely to fare better this spring. Of those, Reichardt singled out D.R. Horton and Lennar. The analyst has “Buy” ratings on both.
Advertisement
Related Stories
Economics
Shelter Costs Drive Inflation Higher Than Expected in January
January Consumer Price Index data show inflation increased more than anticipated as shelter costs continue to rise despite Federal Reserve policy tightening
Economics
Weighing the Effects of the Fed's and Treasury's Latest Announcements
The upshot of the Jan. 31 announcements is that while mortgage rates will stay higher for longer, they're likely to hold steady
Economics
NAHB CEO Tobin Says 'Housing Renaissance' on the Horizon
Responding to positive housing-related data such as falling mortgage rates and increased homebuyer activity, NAHB's CEO Jim Tobin is optimistic
