Home builders are lagging behind the broader market.
As the stock market returned to all-time highs and consumer confidence is strong, shares of home builders have taken a beating, the Wall Street Journal reported.
Toll Brothers has tumbled 23 percent this year while Lennar Corp. slid 17 percent. PulteGroup and D.R. Horton are down 14 percent and 11 percent, respectively. On the other hand, the S&P 500 has climbed 8.4 percent this year.
The challenge comes amid unencouraging housing data. Even as average home prices in major metropolitan areas have slowed, buyers aren’t flocking to the market, the report said. Existing-home sales have fallen for four straight months.
At the same time, buyers are facing limited inventory and rising mortgage rates. Prices for starter homes are the highest they’ve been since 2008, according to a previous report. In the second quarter, first-time buyers needed nearly 23 percent of their income to afford a typical entry-level home — up from 21 percent a year earlier.
But some are hoping it’s a temporary blip.
“Confidence is soaring to new heights which makes us bullish on growth and forecasts that this expansion may indeed shatter records for longevity next summer,” said Chris Rupkey, chief financial economist at MUFG, told the Journal. “The consumer says the economic times we live in is better than you think.” [WSJ] — Meenal Vamburkar