Homebuilders Stocks Decline as Mortgage Rates Rise

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Shares of homebuilders faced significant losses on Thursday, driven by soaring mortgage rates hitting a 23-year high. Consequently, potential homebuyers are stepping back from purchasing properties. The iShares Home Construction ETF (ITB) plummeted by 5.2%, reaching a four-month low during afternoon trading. This marks the biggest one-day drop in 13 months, with all 46 equity components experiencing a decline.

Active Homebuilders Experience Significant Declines

Among the more-active homebuilders, D.R. Horton Inc. (DHI) witnessed a substantial decline of 6.3%, reaching a six-month low. Lennar Corp. (LEN) saw a drop of 5.7%, Toll Brothers Inc. (TOL) slumped by 6.7%, and PulteGroup Inc. (PHM) slid 5.9%.

Home Depot Stock Also Affected

Even the home improvement retail giant, Home Depot Inc., experienced the impact of these market conditions. Its stock (HD) lost 2.4%, putting it on track to achieve its lowest close since June 1.

Mortgage Rates Reach Highest Level Since 2000

As of October 12, the average rate for a 30-year fixed-rate mortgage rose to 7.57%. This marks the highest rate since December 2000. The increase in rates has contributed to buyers “retreating” from the market, as mortgage-purchase applications have reached their lowest levels in nearly 30 years.

New Home Listings Show Minor Decline

According to real estate services company Redfin Corp., new home listings for the four weeks ending on October 8 decreased by 3.9% compared to the previous year. However, this decline represents the smallest decrease in 15 months.

Downward Trend for Redfin’s Stock

Redfin’s stock (RDFN) also faced a decline of 6.1%, reaching a nine-month low due to the challenging market conditions.

Overall Market Impact

Over the past three months, the home construction ETF has experienced a significant decline of 14.1%. In comparison, the S&P 500 has only eased by 3.3%.

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