By Tomi Kilgore
Shares of companies in the real estate services and home building space backed way off their intraday highs on Tuesday, as another surge in Treasury yields to a more-than decade high took the early shine off surprisingly strong economic data.
Despite a growing consensus that the housing market is in recession, the U.S. Commerce Department reported earlier that new homes sales in August soared 28.8% to a seasonally adjusted annual rate of 685,000, from a revised 532,000 in July, while analysts polled by The Wall Street Journal were expecting, on average, a drop to 500,000.
Meanwhile, the yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.55% , which is the benchmark for mortgage rates, climbed 0.098 percentage points to 3.976%, the highest yield since April 2010 . The coincident jump in mortgage rates has made homes less affordable and slowed buying.
“With mortgage rates up making new highs again after the September [Federal Reserve] decision, August’s upside surprise in home sales is unlikely to be repeated,” said Comerica Bank Chief Economist Bill Adams.
Real estate services company Redfin Corp.’s stock /zigman2/quotes/203726414/composite RDFN +2.05% jumped as much as 5.8% intraday, before paring gains to be up 2.3% in afternoon trading, in the wake of the data. That put the stock on track to snap an record-tying eight-session losing streak, in which it plunged 28.3% to close Monday at a record low.
Also in the real estate services space, shares of Zillow Group Inc. /zigman2/quotes/204413973/composite Z +0.90% /zigman2/quotes/205077794/composite ZG +0.96% gained 1.0%, Anywhere Real Estate Inc. /zigman2/quotes/201151464/composite HOUS +4.64% hiked up 2.6% and Douglas Elliman Inc. /zigman2/quotes/231698577/composite DOUG +0.12% advanced 1.0%, with those stocks pulling back from earlier gains ranging from 3.6% to 5.9%.
RE/MAX Holdings Inc.’s stock /zigman2/quotes/205936106/composite RMAX -0.53% reversed an earlier intraday gain of as much as 2.6% to fall 0.8% in recent trading.
The pullback in the stocks comes as the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.11% pulled an intraday U-turn, to be down 0.5% in afternoon trading, after being up as much as 1.7% earlier.
Meanwhile, the SPDR S&P Homebuilders exchange-traded fund /zigman2/quotes/202739297/composite XHB +1.41% swung to a loss of 0.2% from an intraday gain of as much as 2.1%.
Among the ETF’s home builders, Lennar Corp.’s stock /zigman2/quotes/202536373/composite LEN +0.97% slumped 0.6%, but had been up 3.0% at its intraday high.
Raymond James analyst Buck Horne reiterated the market outperform rating he’s had on Lennar for at least the past three years while raising his stock price target to $90 from $75. The new target implies TK% upside from current levels.
Horne said that while he “cannot sugarcoat the difficult period ahead for new home sales” as housing affordability remains “deeply challenged” for an indefinite period, he believes Lennar is poised to take “significant” market share given its ability to make rapid price adjustments and meaningful cost reductions, as well as quickly pivot to single-family “build-for-rent” construction.
Elsewhere, shares of PulteGroup Inc. /zigman2/quotes/201694804/composite PHM +1.36% fell 0.9%, KB Home /zigman2/quotes/206220859/composite KBH +2.79% dropped 1.9%, D.R. Horton Inc. /zigman2/quotes/202032328/composite DHI +1.45% shed 1.2% and Toll Brothers Inc. /zigman2/quotes/201912487/composite TOL +1.42% slid 0.9%, after all were up nearly 2% earlier in the session.
Among home improvement retailers, the stocks of both Home Depot Inc. /zigman2/quotes/208081807/composite HD +1.59% and Lowe’s Companies Inc. /zigman2/quotes/205563664/composite LOW +1.39% were up 0.6%, but both had been up nearly 3% at their intraday highs.