Home Sales Turnaround Supports Our Thesis on This Holding
The run back up in mortgage rates means the November data will be more telling.
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Today we learned that existing home sales in October rose 3.4% and posted their first year-over-year increase in more than three years, according to data from the National Association of Realtors (NAR). This is driving some nice movement in our construction-related holdings today.
By the numbers, total existing home sales — which are defined as completed transactions for single-family homes, townhomes, condominiums and co-ops — rose 3.4% from September to a seasonally-adjusted annual rate of 3.96 million in October. Year over year, sales were up 2.9% compared to the October 2023 figure of 3.85 million. Of the October 2024 sales, single-family home sales represented the vast majority at 3.58 million, up 4.1% compared to year-ago levels. And while the average single-family home price rose 7.6% to $472,900 in October, the year-over-year decline in mortgage rates has helped overall affordability. According to data from Freddie Mac, the 30-year fixed-rate mortgage averaged 6.78% as of November 14, compared to 7.44% a year ago.
All in all, the data is a positive one for the housing market and overall housing activity, and it supports our view that, as the Fed returns monetary policy to more neutral levels, the resulting decline in mortgage rates bodes well for housing demand and construction activity. That is a central part of our thesis behind the Portfolio’s position in Builders FirstSource BLDR shares.
We concur with NAR Chief Economist Lawrence Yun that the worst of the downturn in home sales is likely over, and continued job creation and real wage gains bode well for the housing market, but we also recognize the 30-year mortgage rate is well off its late September low of 6.08%. More than likely, that lower rate benefited October existing home sales figures and we’re likely to see the same with next week’s October new home sales data. When we get the November figures for both a few weeks from now, we’ll have a better indication of housing activity for the current quarter.
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At the time of publication, TheStreet Pro Portfolio was long BLDR.
