Daily Spotlight: Declining Mortgage Rates a Gift for Builders

Summary

Last week the 30-year mortgage rate dipped below 7% for the first time since August and the 10-year Treasury yield dropped below 4% for the first time since July. That should be a holiday surprise for home shoppers. Earlier this month, Douglas Yearley, the CEO of luxury homebuilder Toll Brothers, said he was “encouraged” by the recent decline in mortgage rates. “With inflation easing over the past few quarters, we believe rates may drop further and the timing of the rate decline is setting up nicely for the upcoming spring selling season,” he added. On November 13, the Federal Reserve Bank of Philadelphia released its Survey of Professional Forecasters. Survey participants expected the 10-year Treasury note to yield 4.47% in 1Q24 and 4.39% in 2Q24. If interest rates remain lower than the 1Q24 and 2Q24 levels that forecasters expected, interest-rate-sensitive sectors, such as housing, could perform better than the survey participants expected. New housing starts could surpass the approximately 1.35 million seasonally adjusted annual rate (SAAR) that was predicted for 1Q24 and 2Q24. The Residential Fixed Investment component of GDP could exceed the $726 billion (SAAR) that survey participants expected for 1Q and the $723 billion (SAAR) they expected for 2Q. On December 19, we expect the Commerce Department will report November Housing Starts of 1.35 million (SAAR). On December 20, we expect the National Association of Realtors will report November Existing Home Sales of 3.8 million (SAAR). We expect the Commerce Department to report November New Home Sales of 685,000 (SAAR) on December 22. The S&P/Case-Shiller National Home Price Index for October will be released on December 26. It jumped 3.9% in September. We expect a gain of about 2% for October. The Zillow Home Value Index was up 1.8% in October. In this evolving housing market, Argus recommends Lennar, D.R. Horton, and Toll Brothers — companies with solid financial strength that are adapting to market conditions.

Source: finance.yahoo.com