Homebuilders fall amid mortgage volume drop, residential construction follows

Shares of homebuilders continue to decline as rates begin to creep higher again. According to a report out of the Mortgage Bankers Association, loan application volume decreased 1.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index increased 9% compared with the previous week. Additionally, the Refinance Index decreased 2% from the previous week. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index increased 9% compared with the previous week and was 0.2% lower than the same week one year ago. RUN-UP IN PRICES NOT SUSTAINABLE: The widening gap in home prices versus income growth is not "sustainable," Lawrence Yun, chief economist for the National Association of Realtors, recently said. "From the cyclical low point in home prices six years ago, a typical home price has increased by 48%, while the average wage rate has grown by only 14%," added Yun. MORTGAGE RATES CREEPING UP: Increasing yields on U.S. Treasury bonds mirrors inflation concerns and expectations of the Fed hiking rates at a steeper pace. Mortgage rates move up in tandem with yields on the U.S. 10-year note, thereby increasing costs to home buyers. COST HEADWINDS CONTINUE: According to recent reports, the national labor shortage is making it increasingly difficult and expensive to find construction workers. With that, the price of lumber -- an integral part of the cost of building a home -- is skyrocketing. PRICE ACTION: The entire homebuilder group, including PulteGroup (PHM), D.R. Horton (DHI), Lennar (LEN), KB Home (KBH), Meritage Homes (MTH), Beazer Homes (BZH) and Toll Brothers (TOL) is lower in afternoon trading. RESIDENTIAL CONSTRUCTION STOCKS LOWER: Shares of construction firms exposed the residential construction market are also lower, including Masco Corporation (MAS), Owens Corning (OC) and Leggett & Platt (LEG).

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