Election, Looming Rate Cuts Send Homebuilder Stocks Soaring

A great year for homebuilder stocks could be getting even better.

Since the beginning of the third quarter, homebuilder stocks are soaring on the potential of interest rate cuts and possible policy priorities being put forth in presidential campaigning, Bloomberg reported.

In the third quarter so far, homebuilders are a top five group out of 158 in the S&P 1500 Composite Index. The group of stocks has risen 20 percent this quarter, approaching a record high. Year-to-date, homebuilder shares are up 21 percent against a 16 percent gain by the broader S&P 500.

In the third quarter, D.R. Horton’s stock is up 31 percent, beating all but two other stocks in the S&P 500 Index. Lennar shares have soared by 19 percent in the same period.

The booming homebuilder stocks are in part due to the potential for interest rate cuts, which Federal Reserve chair Jerome Powell has signaled could be coming soon. Mortgage rates are already on a downswing, averaging out at 6.35 percent for a 30-day fixed-rate mortgage as of Aug. 29, according to Freddie Mac. Rate cuts could bring those down further, making home buying more enticing for consumers.

Homebuilders also appear to be benefiting from a rare discussion of the housing market taking place at the highest political level in the nation, with affordability as a hot topic in the run-up to the presidential election in November.

Last month, Vice President Kamala Harris pledged to build 3 million homes — either for rent or ownership — by the end of her first term if she’s elected president. The reality of her goal is questionable, however, as the rules governing the construction of homes largely live on the local level, limiting federal power over the process.

— Holden Walter-Warner