Higher mortgage rates ensure housing recession - Raymond James

MDC Holdings

21/10/2022 14:43

** Raymond James downgrades homebuilders KB Home  KBH.N ,
Lennar Corp  LEN.N , M.D.C. Holdings  MDC.N , PulteGroup Inc
 PHM.N  and Toll Brothers  TOL.N  to "market perform" and D.R.
Horton Inc  DHI.N  to "outperform" from "strong buy"
    ** Brokerage says towering mortgage rates have crippled
ability to afford houses; 30-yr mortgage rates have increased by
200 bps over the past two and a half months
    ** "With average effective mortgage rates now north of 7%,
virtually all housing affordability metrics we track are now in
unprecedented territory," says Raymond James
    ** "As such, the housing sector and homebuilders must now
brace for a Fed-assured hard landing," says Raymond James
    ** "We believe none of our covered names are at risk of
turning unprofitable during 2023," adds brokerage in backdrop of
steep mortgage prices
    ** Brokerage says upcoming earnings by builders will show
significant deterioration in Sep, due to volatility in mortgage
rates
    ** Homebuilders down 1%-3% during premarket trading
    ** Sales of existing U.S. homes slid for an eighth straight
month in September and will likely fall further as the housing
market continues to absorb hard hits from the Federal Reserve's
aggressive interest rate hikes  urn:newsml:reuters.com:*:nL1N31L1GX
 (Reporting by Shashwat Chauhan in Bengaluru)
 ((Shashwat.Chauhan@thomsonreuters.com))