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Forbes Money Markets Homebuilder Fundamentals Deteriorating - Stocks At Risk John S. Tobey Contributor Opinions expressed by Forbes Contributors are their own. Following Aug 6, 2023, 10:49am EDT | Press play to listen to this article! Got it! Share to Facebook Share to Twitter Share to Linkedin Houses under construction on a sunny day. getty The underlying fundamentals of residential construction (AKA homebuilding) have weakened. And yet the stocks have strengthened. So, which is correct? Normally, the stock market is viewed as the leading indicator. However, there are times, like now, when the stock investors get carried away with wishful thinking as I described in my previous article. Therefore, focusing on these key fundamentals now is the best approach. Mortgage interest rate and median new home price trend Because most homebuyers rely on mortgages, the interest rate is a key determinant of how high a home price they can afford to pay. The green line in the graph below shows a high 6% to 7% range has established itself. The effect is showing up in the median new home prices (orange line) that are now in a downtrend. While stock investors like buying on the dip, many new homebuyers are encouraged by a home price uptrend. 30-year mortgage rates (green) and median new house prices (orange) John Tobey (FRB of St Louis - FRED) MORE FOR YOU WWE SummerSlam 2023 Results: Cody Ends Brock Lesnar With Three Cross Rhodes WWE SummerSlam 2023 Results: Logan Paul Beats Ricochet With Brass Knuckles Elon Musk Declaration Sparks Wild Speculation He Could Be About To Blow Up The Bitcoin Ethereum XRP And Dogecoin Price So, both the high mortgage interest rate and new home price downtrend are negative homebuilding fundamentals. Homebuilder attitudes The NAHB (National Association of Homebuilders) has surveyed homebuilder attitudes for many years. Three questions are asked: How are present conditions? What is your outlook? What is the homebuyer traffic like? The graph below shows the overall index for the past four years. The orange line shows the first six months of 2023. While it is in an uptrend, it started at a low level and has not reached an optimistic height like in 2021. Last 3-1/2 years show 2020's turnabout, 2021's optimism, 2022's deterioration and 2023's tepid ...
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