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Shares of U.S. homebuilders have slumped on concerns that interest rates will remain high for an extended period of time, combined with concerns that President-elect Donald Trump’s tariffs and possible mass deportations will drive up construction costs. It fell.
Since Trump’s election victory in November, the S&P 500 Home Construction Index has fallen 17.3%, its lowest level since July. U.S. steelmakers and household goods groups have also suffered losses after two years of post-pandemic boom.
Shares of DR Horton, America’s largest home builder, have fallen 17% in the two months since President Trump’s victory. Homebuilders Lennar and Pulte Group fell 21% and 15%, respectively, during the same period. The three homebuilders collectively shaved $76 billion off their market value.
The decline marks a sharp reversal from the first three quarters of last year, when homebuilder stocks soared on a rebound in new home sales even as interest rates were at their highest levels since 2001. It is something.
The average interest rate on 30-year mortgages was still above 6% as of the end of last year, but the series of rate cuts by the Federal Reserve since September have further boosted the housing construction sector.
But a growing inventory of new and completed homes built after the pandemic is starting to squeeze supply, with Reserve Bank of St. Louis data showing the number of homes under construction has slowed over the past year.
Investor mood has deteriorated particularly in the past two months. “It’s (Trump’s) policy, the interest rate outlook, the increase in inventories…The situation on the ground is definitely different compared to a year ago,” said Jonathan Woloshin, an analyst at UBS Wealth Management. Ta.
Projections released by the Federal Reserve in mid-December suggested that interest rates would fall less sharply in 2025 than previously expected. Analysts and businesses alike are concerned that President Trump’s “America First” policies could raise costs on everything from building materials to labor availability.
President Trump has promised to deport millions of immigrants. According to U.S. Census Bureau data, just over a quarter of construction workers are immigrants and 13% of workers are unauthorized workers, the largest share of any sector.
In December, Barclays downgraded DR Houghton, Pulte Group and KB Home, saying tariffs on critical construction materials including steel, immigration restrictions and rising housing inventories meant a “low interest rate utopia” for home builders. I wrote this in a memo to the customer. . . . There are many obstacles. ”
Barclays analyst Matthew Bouley said the construction market “has now reached its ceiling”.