Homebuilders Jump Most in a Year as Powell Quells Bigger Rate Hikes
(Bloomberg) -- Shares of homebuilder stocks surged Wednesday after Federal Reserve Chair Jerome Powell dashed speculation that the central bank was weighing an even larger interest-rate increase of 75 basis points in the months ahead.
The S&P Supercomposite Homebuilding Index soared 5.2%, its biggest one-day jump since March 2021, after Powell said a bigger-than-50 basis points hike is “not something the committee is actively considering.” KB Home was among the biggest gainers and rose 6.3% and LGI Homes Inc. gained 5.6%, while D.R. Horton Inc., Lennar Corp. and Toll Brothers jumped more than 5% each.
Read more: Fed Hikes Rates Half-Point as Powell Signals Similar Moves Ahead
Homebuilder stocks have faced relentless pressure in 2022, as investors questioned the sustainability of the demand for homes that surged during the pandemic amid supply chain issues and accelerating inflation. As mortgage rates and home prices rose, shares of the builders have fallen away from the record highs many set last year, with the sector losing $51 billion in market value this year as of Tuesday's close.
Americans are also uncertain about purchasing property now. Just a third of Americans said now is a good time to buy a house, the worst share in a Gallup Inc. survey's history back to 1978.
With that slump comes depressed valuations: the sector priced at 4.9 times profits projected over the next 12 months. That's lower than its five-year average of 9.89 and well below S&P 500 Index's 18 figure.
©2022 Bloomberg L.P.
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