The recent surge in U.S. Treasury yields has had a significant impact on global financial markets, particularly the homebuilder industry. This trend continued on Tuesday as rate-sensitive homebuilder stocks experienced a decline.
Mortgage Rates at a 23-Year High
The housing market is already facing challenges with mortgage rates reaching their highest level in 23 years. Currently, the average rate stands at 6.72% for a 15-year loan and 7.65% for a 30-year fixed-rate loan.
Resilient Bonds
Despite the negative performance of homebuilder stocks, homebuilder bonds have shown resilience in these turbulent times.
According to BondCliQ Media Services, the bonds of multiple companies, including Beazer Homes USA Inc. (BZH), D.R. Horton Inc. (DHI), Hovnanian Enterprises Inc. (HOV), KB Home (KBH), M.D.C. Holdings Inc. (MDC), NVR Inc. (NVR), and Toll Brothers Inc. (TOL), have seen increased buying activity. PulteGroup Inc. (PHM), however, has experienced greater selling.
Assessing Debt Exposure
Analyzing each company’s outstanding debt and its maturity dates provides insight into refinancing risks. D.R. Horton takes the lead in this aspect with $1.2 billion of debt maturing within a year.
Housing Sector Struggles
The housing sector has faced challenges due to the Federal Reserve’s decision to raise interest rates. In August, a surge in mortgage rates resulted in a decline in pending home sales to the lowest level since April 2020. Additionally, the median price of existing homes reached $407,100.
Stock Declines
On Tuesday, Beazer Homes’ stock experienced the most significant decline, falling by 6.5%. M.D.C. Holdings and KB Home followed with declines of 5.7% and 4.5%, respectively.
PulteGroup and Toll Brothers also faced declines, with both stocks down by 3.8%.
Impact on the S&P 500
The S&P 500 (SPX) felt the effects of these developments as well, with a 1.5% decrease.
