Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some
continued education for some credentials I maintain and it occurred to me that
we all could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
Many of us pay attention to the
housing market because we are either planning another move in our future or we
know that it is a good indicator for the economy in general. The following article points to some recent
pull backs in housing demand and new construction. I’m not sure the trend is for the long haul
but it certainly looks like the near term will be much slower for this market.
Surging mortgage rates
spur downgrade of homebuilder stocks by Bank of America as the US housing
market slows
A worker makes repairs to a home under construction at the Lennar Bridgeway development in Newark, California. Justin Sullivan/Getty Images
·
Bank
of America on Thursday downgraded homebuilders Lennar, Toll Brothers and KB
Home.
·
New
home demand has dropped over the last three months after two years of
unprecedented growth.
·
Affordability
is down, with the average monthly mortgage payment up 50% in some
markets.
Get the inside scoop
on what traders are talking about — delivered daily to your inbox.
Jumping mortgage rates are contributing to lower demand for newly built
homes, and while a bottom in the slump may be in sight, Bank of America said
Thursday it was downgrading three homebuilding stocks.
The rating cuts for Lennar, Toll Brothers, and KB Home were published on the same day Freddie Mac reported a 5.5% average rate on a 30-year fixed-rate mortgage, a two-month high. The benchmark rate is up from 3.1% at the end of 2021 and 2.87% a year ago.
"New home demand has reset lower over the last three months following two years of unprecedented growth," research analyst Rafe Jadrosich said in the BofA note. Earnings for homebuilders and industry data indicate a sharp deceleration in demand in June and July on the back of "worsening affordability" and lower consumer confidence.
The investment bank sees a downside to homebuilder estimates and it's modeling, on average, per-share earnings 14% below consensus in 2023. Homebuilders have offset supply-chain bottlenecks and input cost inflation through price increases. "Going forward, we see risk that prices will begin to hit a ceiling and builders will reintroduce sales incentives as worsening affordability pressures demand," said Jadrosich.
Lennar was cut to an underperform rating from neutral, Toll Brothers was moved down to neutral from buy, and KB Home was reduced to neutral from buy. The ratings reflect valuation and relative positioning for different trends including a faster slowdown in West and Mountain markets than the national average and demand for speculative home sales that are outpacing built-to-order.
The average monthly mortgage payment for a new home in some key metro markets is up 40%-50% in the last six months and affordability was at the lowest levels since 2006, with entry-level buyers priced out, BofA said.
"We acknowledge July could be the trough; however, we expect overall demand to remain weak," with mortgage rates up substantially year-to-date and with home prices elevated. "Favorable demographics and migration trends are tailwinds, but buyers no longer feel the same urgency as the prior two years and will be more patient," the firm said.
Bank of America did upgrade DreamFinders to neutral from underperform and raised its price objective on the stock to $12 from $10.50. The company is concentrated in Florida and has high exposure to the build-to-rent segment, which BofA expects to outperform.
"DFH controls 100% of land through options, which better positions it in a slowing market," it said.
The S&P 500 Homebuilding Select Industry Index has lost about 28% this year.
(As with any of these informative articles,
anyone who needs someone to talk to about
this
very subject contact me and I can direct you to a knowledgeable advisor).
No comments:
Post a Comment