(CNN) — Prospective homebuyers are getting a double whammy of bad news: Prices remain prohibitively high for many consumers, largely due to tight supply. Mortgage rates have also spiked to their highest level in 14 years.
That’s weighing on demand for both new home construction and sales of existing homes on the market. Homebuilders Lennar and KB Home reported their latest quarterly results on Wednesday afternoon. The two companies posted earnings that beat analysts’ forecasts, but revenue fell short of Wall Street expectations.
“Sales have clearly been affected by rising interest rates,” Stuart Miller, Lennar’s chief executive, said in the company’s earnings release. Miller added that “there remains a significant national housing shortage, especially worker housing, and demand remains strong.”
Lennar also reported that new home orders fell 12% from a year earlier and that he is trying to “navigate the rebalancing between price and interest rates.”
Mortgage rates are likely to rise further given the Fed’s series of large interest rate hikes and likely plans for more hikes in the coming months.
KB Home Chairman and CEO Jeffrey Mezger said in Wednesday’s earnings report that “the combination of rising mortgage interest rates, ongoing inflation and other macro concerns has caused many potential buyers to pause in your decision to buy a home.
KB Home shares fell 5% on Thursday after its earnings report. Lennar rose 2%. But both stocks have slumped this year along with other homebuilders. Lennar shares fell 32% in 2022, while KB Home shares plunged 40%.
The SPDR S&P Homebuilders ETF, which owns these two stocks and shares in other housing-related companies such as air-conditioner maker Carrier and retailers Home Depot and Lowe’s, is down 35% this year.
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Source : ksltv.com