Last month’s decision by the Federal Reserve to raise short-term interest rates may have spooked both borrowers and some investors but even a cursory glimpse at the housing market shows that homebuilders may be feeling sharp pains as well. Homebuilders shares in the S&P 1500 are down nearly 40 percent since mid-January and have joined the recent of the stock market in its recent slide.
A report from CNBC states that the drop in homebuilder stock prices comes in tandem with the rise in the 10-year Treasury yield following the Fed rate hike. The coinciding increase in mortgage rates has caused investors to back away from such investments. In addition to rising mortgage rates, scarcity in buildable land and rising material costs have stifled new home construction.
While some market trendsetters have downgraded builder stocks, other investment experts are doubling-down on their ‘buy’ stance claiming that even with higher rates, demand for housing remains high which could result in a rebound in stock prices.
Meanwhile, conforming no-point 30-year fixed mortgage rates are averaging 4.75 percent, 15-year rates are near 4.25 percent and the 5-year ARM is averaging 4.25 percent.
Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.