XHB - XHB: Homebuilders Defy Gravity Is The Party Over?
2024-03-08 16:02:33 ET
Summary
- Homebuilding stocks have performed well despite elevated mortgage rates and subdued consumer confidence.
- The relationship between homebuilding stocks and interest rates is not perfect, but bigger trends have been supported by rates.
- Housing affordability is at its worst since the Great Financial Crisis, but there is potential for improvement if mortgage rates continue to decline.
- Sticky inflation and elevated rates are starting to fuel higher supply, which is likely caused by declining credit conditions. If this turns into more "forced" selling, we could see pressure on homebuilders.
Introduction
- Elevated mortgage rates.
- Subdued consumer confidence.
- Sticks inflation at above-average levels.
- An aggressive Federal Reserve hiking cycle.
Above, I listed a few recent economic developments.
If you hadn't followed the stock market over the past few years and only had the info above, where do you think homebuilding stocks would be trading?
Probably lower, right?
Looking at the chart below, we see that homebuilders have done the exact opposite. The SPDR S&P Homebuilders ETF ( XHB ) is currently trading at $106....
XHB: Homebuilders Defy Gravity, Is The Party Over?