4 Homebuilding Stocks to Avoid as Mortgage Rates Rise Over 3% By StockNews

© Reuters. 4 Homebuilding Stocks to Avoid as Mortgage Rates Rise Over 3%

Rising mortgage rates have caused a decline in refinancing and new loan originations, which should dampen the homebuilding industry’s growth. In addition, supply chain constraints are expected to muddy the industry’s near-term prospects. Therefore, we think homebuilding stocks D.H Horton (DHI), NVR Inc . (NYSE:), Toll Brothers (NYSE:), and KB Home (NYSE:) are best avoided now. Read on.Mortgage rates hit a three-month high last week as bond markets responded to the Federal Reserve’s statement that it would “soon” start reducing its fixed-asset purchases. The average contract interest rate jumped to 3.14% from 3.10% for 30-year fixed-rate mortgages, the highest rate since July.

Mortgage applications to purchase a home declined 13% year-over-year, negatively impacting companies operating in the housing business. Furthermore, impending Fed tapering moves, potential changes to monetary policy, and ongoing supply chain constraints are expected to dampen the homebuilding industry’s near-term prospects.

Given the industry’s gloomy growth prospects, we believe homebuilding stocks D.H Horton Inc. (DHI), NVR Inc. (NVR), Toll Brothers Inc. (TOL), and KB Home (KBH) could suffer a downtrend in the near term. So, these stocks are best avoided now.

Continue reading on StockNews

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.