HomeBusinessStocks erase previous gains as bond yields rise

Stocks erase previous gains as bond yields rise

Shares of homebuilders fell Monday after a closely watched housing sentiment index broke a four-month streak of gains amid high mortgage rates.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) remained at 51 in April, unchanged from March. To be fair, any number above 50 indicates that more builders consider conditions good than bad.

“April’s flat data suggests there is potential for demand growth, but buyers are holding back until they can better gauge where rates are headed,” NAHB chief economist Robert Dietz said in a statement.

Lennar (LEN), Pulte (PHM) and Toll Brothers (TOL) were all down more than 1% by mid-morning, while the SPDR S&P Homebuilders ETF (XHB) was down 0.3%.

The flat confidence among builders underlines how many potential buyers and sellers, already dealing with high home prices and limited housing inventory, are staying put. It comes after higher-than-expected inflation pressures last week prompted investors to cut the number of rate cuts they see this year to two, less than the median of three the Fed forecast at its March meeting.

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“With markets now adjusting to slightly higher interest rates due to recent inflation data, we continue to expect the Federal Reserve to announce future rate cuts later this year and mortgage rates to moderate in the second half of 2024,” Dietz said.

Mortgage rates have remained slightly higher compared to the beginning of the year, pushing borrowers to the sidelines just as the spring homebuying season kicks off. The average 30-year mortgage rate rose to 6.88%, up from 6.82% the week before, Freddie Mac reported.

In April, builders pulled back somewhat on lowering home prices. 22% of builders indicated that they were doing this, compared to 24% in March and 36% in December last year.

Meanwhile, the use of sales incentives fell to 57% in April, compared to 60% in March.

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