Wednesday, March 29, 2023
HomeMarketBuilder Stocks Rose. Mortgage Rates Could Keep Falling.

Builder Stocks Rose. Mortgage Rates Could Keep Falling.

Mortgage rate moves have dominated conversation about the housing market.

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Frederic J. Brown/Getty Images

Builder stocks gained on Wednesday after the Federal Reserve lifted interest rates by a quarter of a percentage point, signaling a slower pace of monetary-policy tightening. Investors may be looking out for lower mortgage rates rather than any housing-related comments from the Fed.

Two exchange-traded funds tracking the industry, the
SPDR S&P Homebuilders
ETF (ticker: XHB) and the
iShares U.S. Home Construction
ETF (ITB), each gained 2.1% at the close of trading.
(PHM) climbed 2.8% while
D.R. Horton
) was up 1.2%. The gains were higher than the broader indexes: the S&P 500 was up 1.1%, while the Dow Jones Industrial Average was flat.

The Federal Reserve on Wednesday raised its target for the federal funds rate by 0.25 percentage point, in-line with market expectations. Federal Chairman Jerome Powell, at a press conference following the Federal Open Market Committee meeting, touched upon the housing market—but his comments likely contained little that would likely surprise investors.

Powell said that higher mortgage rates were weakening housing activity, and that the sector’s contribution to inflation data is expected to remain hot for some time, but will eventually slow provided rental price growth on new leases continues to weaken.

Builder stocks likely gained on the expectation for lower mortgage rates rather than on an outlook for the housing market. Movements in mortgage rates have dominated conversation on the housing market in recent months.

The average 30-year fixed mortgage rate increased through much of 2022 before peaking in October and November. Rates have recently fallen, to 6.13% as of last week, according to Freddie Mac data.

The rate increase and Powell’s comments could help move mortgage rates lower. The 10-year Treasury yield, with which mortgage rates often move, was roughly 0.09 percentage point lower late Wednesday afternoon.

“The Federal Reserve controls short-term rates, but long-term rates, including 30-year mortgage rates are a function of market expectations for the path of the economy,” Mike Fratantoni, the Mortgage Bankers Association’s chief economist, said in a statement. “Investors are betting that the economic slowdown and the Fed’s eventual victory over inflation will result in lower rates over time.”

The trade group’s January forecast foresees mortgage rates falling through the year, ending 2023 at 5.2% in the fourth quarter.

The size of the central bank’s rate increase may be a factor. “The latest lower rate hike suggests a slowdown in the Fed’s momentum, which could be an incremental positive for mortgage markets as the long-term rates will continue to drop,” Shampa Bhattacharya, director at Fitch Ratings, said in a statement.

Write to Shaina Mishkin at


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