Will Homebuilders Recieve a Boost From Record Low Mortgage Rates?
On Thursday, Freddie Mac reported that the average rate on a 30-year fixed mortgage fell to 3.91 percent this week. The rate matches the record low reached just two weeks ago. Meanwhile the average rate on a 15-year fixed mortgage edged down to 3.23 percent, slightly higher than its 3.21 percent record low.
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Although mortgage rates are at record lows, few people are able to take advantage as unemployment remains high and wage growth stays low. Also, many people now see a home as a bottomless money pit. According to Reis Inc. (NASDAQ:REIS), U.S. apartment vacancies declined to a 10-year low in the fourth quarter. The vacancy rate has fallen for seven straight quarters from a three-decade high of 8 percent at the end of 2009, according to Reis.
After the news, homebuilders (NYSEARCA:XHB) such as Masco Corp. (NYSE:MAS) and PulteGroup, Inc. (NYSE:PHM) surged nearly 4 percent higher, while Lennar Corp. (NYSE:LEN) and KB Home (NYSE:KBH) gained more than 1 percent. Other homebuilders such as DR Horton Inc. (NYSE:DHI) declined by .84 percent.
In recent months, homebuilder shares have been rising as investors anticipate an increase in rental construction and more housing stimulus. Despite falling 16 percent in September, shares of Toll Brothers Inc. (NYSE:TOL) have surged more than 35 percent since October. On Wednesday, the Federal Reserve urged Congress and other policy makers to take more action on the battered housing sector. The WSJ reports, “The Fed warned that tight mortgage-lending standards threaten to hold back the economy. The Fed also signaled support for more aggressive use of Fannie Mae and Freddie Mac to support a housing recovery. The firms, which don’t make loans but purchase them from lenders, were taken over by the government three years ago and are overseen by a separate regulator, the Federal Housing Finance Agency, which has strictly interpreted its charge to limit the firms’ losses.”
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