Greater than expected drops in sales last month have caused some builder stocks to drop. Lennar, Pulte, DR Horton, and Toll Brothers experienced 2% drops in shares, according to CNBC. The 11% drop in sales in November exceeded expectations and resulted in October’s sales reading to be revised lower. CNBC says the recent drops could be a result of rising home prices, which grew by 2.2% compared to November 2019. Sales hit an annualized rate of 841,000 last month. For comparison, sales last peaked in July when sales hit an annualized rate of 979,000.
“In a sign that affordability will remain a primary challenge, sales of entry-level homes — priced below $200,000 — accounted for only 2% of total sales,” said George Ratiu, senior economist at realtor.com. “These numbers reflected the slowing economy, rising unemployment claims, and growing affordability challenge, which hampered activity despite record-low mortgage rates.”
Mortgage rates dropped dramatically in November, when these sales were signed. That gave buyers more purchasing power, but also likely helped prices rise for the same reason.