Mar 21, 2023
Homebuilders Outperform as Home Resales Data End Record Slide
(Bloomberg) -- Homebuilders are rising as much as 1.7% Tuesday after data showed previously owned home sales snapped a yearlong slide, rising in February by the most since mid-2020.
The better-than-expected results serve as a glimmer of hope for investors amid rampant inflation, a banking crisis and economic uncertainty. The S&P Composite 1500 Homebuilding Index is up 17% so far this year.
Median resale home prices declined for the first time in about 11 months and are “likely to dive further into negative territory moving forward, which we think would be a good development relative to broader inflation and, more generally, affordability,” Stephens analyst John Campbell wrote in a note Tuesday.
Campbell said in an email that investors may have already considered the good news on home sales prior to the release on Tuesday. That along with improved housing outlooks and interest rates moving lower over the past few weeks accounts for the recent equity moves, he added.
Looking forward — while mortgage rates have eased from their peak, home resales could be in short supply, as homeowners with lower mortgage rates struggle to find motivation to enter a market with higher rates.
“We don’t expect similar-sized increases in home sales in the months ahead,” Nancy Vanden Houten, economist at Oxford Economics, wrote in a note, noting that “February sales primarily reflect contracts signed a month or two earlier, before the partial reversal of the November-January decline in mortgage rates.”
While the US housing outlook continues to look murky, Campbell said, pullbacks in 30-year mortgage rates in recent weeks due to the fallout from the Silicon Valley Bank collapse could help support a slightly better spring selling season.
©2023 Bloomberg L.P.