DFH - Homebuilder price targets EPS estimates trimmed at BofA due to 'pull forward'

Bank of America analyst Rafe Jadrosich is expecting demand for new homes to peak in Q2 2022 as higher mortgage rates create a "pull forward" in which home buyers move to buy before rates move any higher. iShares U.S. Home Construction ETF (ITB) is falling 1.1% in Monday morning trading. "We expect demand to moderate in late-2Q and 3Q as higher mortgage rates impact home buyers and the pull forward benefit subsides," the analyst wrote in a note dated Monday. On average, BofA is trimming 2022 EPS estimates by 5% and 2023 EPS estimates by 10% to reflect lower gross margin assumptions. He also reduced price targets for the homebuilders he covers by an average of 15%, "based on lower price-to-book ratios given slowing demand and potential margin headwinds." "Going forward, we see risk that prices will begin to hit a ceiling and builders will reintroduce sales incentives as worsening affordability pressures

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Homebuilder price targets, EPS estimates trimmed at BofA due to 'pull forward'