(Bloomberg) -- Shares of U.S. homebuilders are now in their 10th straight day of decline, the longest losing streak for the sector since 2002, when it lasted 11 days. And this after performing four times as well as the broader market last year.
Blame borrowing costs for spooking investors, who worry the shares will decline as rising interest rates make housing more expensive.
An increase from 4 to 5 percent for a 30-year mortgage, for example, would drive up monthly bills by 12 percent. Right now, the average 30-year mortgage rate is 4.22 percent, its highest in about a year, according to data from Freddie Mac, and not far off from a four-year high of 4.33 percent. The 30-year mortgage rate tends to track the path of the 10-year Treasury yield, which is already at its highest level since January 2014.
Day 10 of the homebuilder slump (which this guy kind of called) follows a terrible Friday for the broader market as well, and the S&P 500 fell four days last week.
Still, the S&P is up 2.5 percent so far this year as of 12.40 p.m. ET Monday, even after Friday's rout, while the homebuilders are down 8 percent.
Investors are overreacting to the homebuilder shares' performance, said Alex Barron, an analyst with the Housing Research Center in El Paso, Texas. Homebuilders are reporting strong results, and Barron's on-the-ground sources tell him some buyers are even speeding up their purchases to beat out further rate increases. There's a “tremendous” number of people buying homes, he said.
Ten days ago, “everybody thought the world was rosy,” Barron said. “Now everybody thinks the world's coming to an end. It's not.”
To contact the editor responsible for this story: Peter Jeffrey at pjeffrey@bloomberg.net, Christine Maurus
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