As mortgage rates soften, 2024 is expected to see a boost in housing demand, which could benefit housing-related stocks. Analyst Jake Gordon of Bespoke Investments believes housing equities trade in correlation with rates, with lower rates a boost for home stocks.
Yahoo Finance's Dani Romero breaks down the details, providing insights into the dynamics.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
JULIE HYMAN: New mortgage rate data out today. The 30 year fixed rate mortgage ticking up slightly and a new report shows how housing stocks are dependent on mortgage rates. Here to help break down all of this data is Yahoo Finance's Dani Romero. So the mortgage rate going up, that's not what a lot of people want to hear.
DANI ROMERO: Well, but it is softer though. These are softer rates, are setting the tone for housing stocks and analysts at Bespoke Investments, Jake Gordon says that housing stocks are in sync with mortgage rates, and so suggesting that lower rates means a bullish view for housing stocks.
And he's really basing his analysis on the performance of iShares US home construction ETF, which is a ticker ITB, and the inverted 30 year fixed mortgage rate. And both of those lines really do go in tandem. And so when rates go up, that means that ITB falls. When rates fall, ITB rises.
And so that really points and paints the picture that if you want to know where housing stocks are going to land, look at mortgage rates.
JOSH LIPTON: And so home builders benefited, Dani, from this high interest rate environment by offering incentives. Is that-- is that still a play this year?
DANI ROMERO: That's the big debate across small home builders and big home builders. And recent data from the National Association of Home Builders really does show that 31% of builders slashed home prices and that is the lowest rate since August, while 61% of builders only offered some form of an incentive and that hasn't really changed since September-- since October, excuse me.
So while this survey really just is casting a net on the smaller home builders, the big home builders are also discussing it too. DR Horton said that they're not going to be pulling back on incentives. KB Home said that they would. We'll have to just wait and see this year, especially how everything is kind of rolling out.
I think it's really up for debate of whether or not they will actually pull the plug on these incentives.
JOSH LIPTON: All right. We'll keep watching. Thank you, Dani.
