Shares of companies in the real estate services and homebuilding space retreated from their intraday highs on Tuesday as a further surge in Treasury yields to a more than ten-year high shed light on surprising economic data. solid.
Despite a growing consensus that the housing market is in a recession, the US Commerce Department earlier reported that new home sales in August soared 28.8% to a seasonally adjusted annual rate of 685,000, down from a revised 532,000 in July, while analysts polled by The Wall Street Journal expected, on average, a decline to 500,000.
Meanwhile, the yield on the 10-year Treasury note BX:TMUBMUSD10Y,
which is the benchmark for mortgage rates, climbed 0.098 percentage points to 3.976%, the highest return since April 2010. The simultaneous rise in mortgage rates made homes less affordable and slowed purchases.
“With rising mortgage rates once again reaching new highs after September [Federal Reserve] decision, August’s upside home sales surprise is unlikely to be repeated,” said Comerica Bank chief economist Bill Adams.
Read also: ‘Housing market may need to correct’ : Mortgage rates hit 6.29%, according to Freddie Mac.
Shares of real estate services company Redfin Corp. RDFN
jumped as high as 5.8% intraday, before paring gains to 2.3% in afternoon trading, in the wake of the data. That put the title on track to snap an eight-session record losing streak, in which it plunged 28.3% to close Monday at a record low.
Also in the field of real estate services, the shares of Zillow Group Inc. Z
ZG
gained 1.0%, Anywhere Real Estate Inc. HOUS
increased by 2.6% and Douglas Elliman Inc. DOUG
rose 1.0%, with these stocks pulling back from earlier gains ranging from 3.6% to 5.9%.
RMAX stock of RE/MAX Holdings Inc.
reversed an earlier intraday gain of up to 2.6% to drop 0.8% in recent trading.
The decline in stocks comes as the S&P 500 SPX index
reversed intraday, to be down 0.5% in afternoon trading, after rising 1.7% earlier.
Meanwhile, the SPDR S&P Homebuilders XHB exchange-traded fund
tipped to a loss of 0.2% against an intraday gain of up to 2.1%.
Among the homebuilders in the ETF, Lennar Corp.’s LEN stock.
fell 0.6%, but had risen 3.0% to its intraday high.
Raymond James analyst Buck Horne reiterated the market outperformance rating he had on Lennar for at least the past three years while raising his share price target to $90 from $75. The new target implies a higher percentage of TK than the current levels.
Horne said while he “can’t sugarcoat the tough time ahead for new home sales” as housing affordability remains “deeply contested” for an indefinite period, he believes Lennar is poised to take a “significant” market share given its ability to make rapid price adjustments. and significant cost reductions, as well as a rapid shift to “built-to-rent” single-family construction.
Elsewhere, shares of PulteGroup Inc. PHM
fell 0.9%, KB Home KBH
fell 1.9%, DR Horton Inc. DHI
lost 1.2% and Toll Brothers Inc. TOL
slid 0.9%, after all they were up almost 2% earlier in the session.
Among home improvement retailers, Home Depot Inc. HD stocks
and Lowe’s Companies Inc. LOW
were up 0.6%, but both were up nearly 3% to their intraday highs.