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Rising mortgage rates hit home builders as buyers pull back

Rising mortgage rates hit home builders as buyers pull back



Buying or selling a home? Hear what this economist has to say about pricesReplayMore Videos ... (15 Videos)Buying or selling a home? Hear what this economist has to say about prices'Pay rent or buy some food': Millions of renters unsure if they can make rentMortgage rates are soaring. Here's what that means for home buyersRealtor.com chief economist shares her advice for homebuyers and sellersTypical monthly payment for US home up 42% in a yearRedfin Chief Economist: Despite signs of the housing market cooling, prices will stay highHome buyers aren't using a realtor. Here's what they're doing instead'Puts me on the street': Americans forced out of homes as rents skyrocketWhy mortgage rates will likely continue to risePop star's childhood home hits the market for $1MBuying a flip? Home inspectors explain red flagsSee how inflation is affecting renters and homeowners across the US This home was built for the next pandemic. See its defining featuresThis is what a $1 million home looks like in 4 European citiesHere's what a $1 million home looks like in three different citiesNew York (CNN Business)Prospective home buyers are getting hit by a double whammy of bad news: Prices remain prohibitively high for many consumers, largely due to low supply. Mortgage rates have also skyrocketed to their highest level in 14 years.

That is weighing on demand for both new home construction as well as sales of existing homes on the market. Home builders Lennar (LEN) and KB Home (KBH) both reported their latest quarterly results Wednesday afternoon. The two companies each posted a profit that topped analysts' forecasts, but revenue was below Wall Street's expectations. "Sales have clearly been impacted by rising interest rates," Stuart Miller, Lennar's executive chairman, said in the company's earnings release. Miller added that "there remains a significant national shortage of housing, especially workforce housing, and demand remains strong."Lennar also reported that orders for new homes fell 12% from a year ago and that it is trying to "navigate the rebalance between price and interest rates."The housing mess, explainedMortgage rates are likely to head even higher given the Federal Reserve's series of big interest rate increases and likely plans for even more hikes in the coming months.Read MoreKB Home chairman and CEO Jeffrey Mezger said in Wednesday's earnings report that "the combination of rising mortgage interest rates, ongoing inflation and other macro concerns has caused many prospective buyers to pause on their homebuying decision." Shares of KB Home fell 5% Thursday following its earnings report. Lennar rose 2%. But both stocks have plunged this year along with other builders. Lennar's stock is down 32% in 2022 while KB Home's shares have plummeted 40%. The SPDR S&P Homebuilders ETF (XHB), which owns these two stocks and shares of other housing related companies such as air conditioner maker Carrier and retailers Home Depot (HD) and Lowe's (LOW), is down 35% this year.


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