Rising mortgage rates and softening housing demand are casting a shadow over homebuilding stocks, which fell for a fifth consecutive day and are on pace for their worst start to the year on record.
The S&P Supercomposite Homebuilders Index fell as much as 7.3% on Thursday as investor woes deepened with mortgage rates jumping by the most since 1987 and housing starts dropping more than expected last month. Tri Pointe Homes Inc., Century Communities Inc. and Taylor Morrison Home Corp. were among the biggest decliners, falling by at least 10% each.
“Builders may be tapping the brakes given slowing buyer traffic and the view that prices need to correct in the hottest markets,” said Citigroup Inc. analyst Anthony Pettinari. As the Federal Reserve pursues more hawkish measures after Wednesday’s 75-basis point hike, discounting and outright price reductions on houses may become more commonplace, he added in a report released Thursday.
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