Housing Construction Companies' Stocks Decline Due to Weak October New Home Sales

On Tuesday, shares of U.S. homebuilders fell after the release of new home sales data for October, which came in well below market expectations. According to a report published by official sources, new single-family home sales decreased by 17% to an annual rate of 610,000 units, marking the lowest level in nearly two years. Analysts had forecasted a figure of 725,000 units.

The decline in sales was influenced by the impact of Hurricanes Helene and Milton, which affected the housing market in the Southeast, the country's largest housing region. Sales in the South dropped by 28% to 339,000, representing the slowest pace since April 2020. While sales also declined in the West, there were increases in the Northeast and Midwest.

Despite the overall decline, the average sales price of new homes rose to $437,300 in October, the highest level in 14 months. This price increase is partially attributed to sales moving away from the South, where home prices are generally lower.

The temporary boost in the housing market triggered by a brief drop in mortgage interest rates in September did not carry into October. Investors began to anticipate higher inflation and budget deficits with the election of President Donald Trump, leading to a resurgence in mortgage interest rates.

Among the affected homebuilders were Lennar Corp. (NYSE: LEN), PulteGroup (NYSE: PHM), D. R. Horton (NYSE: DHI), Toll Brothers (NYSE: TOL), Beazer Homes (NYSE: BZH), Meritage Homes Corporation (NYSE: MTH), and the SPDR S&P Homebuilders ETF (NYSE: XHB), with their stock prices declining between 1% and 3%.