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The home-builder sector suffered a broad selloff Wednesday as a rise in Treasury yields, which highlighted concerns over generationally low housing affordability, offset data showing a big beat in new-home sales.
The iShares U.S. Home Construction exchange-traded fund
ITB
dropped 1.3% toward a six-month low in morning trading, with 42 of 46 equity components losing ground.
The selloff comes despite the U.S. Commerce Department reporting that sales of newly built homes surged 12.3% in September to an annual rate of 759,000 homes, the highest level since February 2022 and well above expectations of an annual sales rate of 680,000 homes.
Meanwhile, the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose 0.074 percentage points to 4.914%, while the 30-year Treasury bond yield
BX:TMUBMUSD30Y
climbed 0.092 percentage points to 5.055%, to get back above the 5% threshold after two days below it.
Rising Treasury yields lead to higher mortgage rates, which have reached the highest levels in decades, making homes less affordable.
“The combination of rising prices and … rising mortgage rates has pushed affordability to its lowest level since July of 1985,” said Andy Florence, chief executive of real-estate-marketplace provider CoStar Group Inc.
CSGP,
in a conference call with analysts late Tuesday, according to an AlphaSense transcript.
Within the home-builder ETF, Owens Corning’s stock
OC,
was the biggest decliner, as it tumbled 9.2% toward a near five-month low and the worst one-day performance in more than three years.
The maker of products used to build homes, such as insulation, roofing and fiberglass composites, reported before the open a third-quarter profit that topped expectations but revenue that fell short, as weakness in composites and insulation sales offset strength in roofing.
Among some of the home-builder ETF’s more active components, shares of PulteGroup Inc.
PHM,
dropped 1.1%. On Tuesday, the stock rose 1.5% after the company beat third-quarter profit expectations, while revenue was slightly below.
Elsewhere, shares of KB Home
KBH,
fell 0.9%, Lennar Corp.
LEN,
lost 1.6%, D.R. Horton Inc.
DHI,
dropped 1.1%, Toll Brothers Inc.
TOL,
gave up 1.7% and Taylor Morrison Home Corp.
TMHC,
shed 3.7%.
The ITB has sunk 19.1% over the past three months, while the S&P 500
SPX
has declined 7.9%.
