PulteGroup, Inc (NYSE:PHM) not doing a volte face any time soon
The NAHB housing market index rose by 3 points from the downwardly-revised 56 in the month of July to 56, this August. The reading for July had been the highest for this index since 2006 January. A reading below 50 is an indicator that a greater number of builders consider sales to be poor against those that think they are good. This reading was above the expected reading of 57.
In July, the sub-indexes that measure current-sales expectations and conditions stood at 62. The reading on sales projections increased by one point to 68. The sub-index that is an estimation of prospective-buyer traffic stayed steady at 45. The sales-expectations reading is the highest since 2006 March. Early last week, the NAHB had reported that housing-affordability had dropped right across the country.
In the Q2 of this year, 63.3% of existing and new homes sold could be afforded by families who had a $64,000 median income which was a dip from the 73.7% that they stood at in the Q1. Increasing mortgage loan rates and home prices have started to take their toll on the sales of homes. There was a peak in the prices of shares of publicly-traded builders with PulteGroup, Inc (NYSE:PHM) gaining as much as 90%, D.R. Horton Inc had risen by around 50%, Toll Brothers had ascended 42%. Since mid-may they all are down in the range of 13%-40%.
Buyers treading lightly
Since May, the 30 year fixed-mortgage rate has risen by more than one full point. Though the rates stay 4.5% or lower, buyers are now more cautious. In most regions, home prices stay well-below the peaks they experienced even though there was a rise in prices. Buyers are getting smarter and know that the sub 4 percent mortgage rates are not going to be returning in a hurry. They are going to be more cautious primarily due to the cloud of uncertainty that hangs above the United States economy.