U.S. home builders and other real estate-related company stocks plunged on Wednesday after home improvement retailer Lowe’s (LOW) pointed out that interest rate pressures continue to suppress home sales. Several of these stocks became the biggest decliners in the S&P 500 that day, contrasting sharply with the index’s 0.8% gain. Data showed Lowe’s stock fell 5.6%, Lennar Corp (LEN) dropped 4.9%, PulteGroup (PHM) declined 4.7%, D.R. Horton (DHI) fell 4.0%, and building materials company Builders FirstSource (BLDR) slid 6.4%. Additionally, the S&P 1500 Homebuilding Index fell 3.7%, hitting a three-week low, while the Philadelphia Housing Sector Index declined 3%.
Lowe’s full-year sales and earnings guidance fell short of market expectations. In a conference call, CEO Marvin Ellison stated that consumer confidence remains low due to inflationary pressures and overall economic uncertainty. He also pointed out that the existing lock-in effect is putting pressure on housing turnover and new construction starts. Based on this, Lowe’s anticipates that improvement in the housing and home improvement markets will be a gradual process.
Earlier, on Tuesday, Home Depot’s Chief Financial Officer Richard McPhail also noted that U.S. consumers have been in a frozen housing environment since 2023, with no significant improvement observed. The company’s stock fell 2.3% on Wednesday, after rising about 2% on Tuesday.
Data released on Wednesday showed that the average interest rate for the 30-year fixed-rate mortgage in the U.S. fell by 8 basis points to 6.09%. However, mortgage purchase applications, one of the most forward-looking indicators for the housing market, actually declined by 4.7%.
Constrained by limited supply, high interest rates, and rising construction costs, the U.S. housing market continues to face pressure. Existing home sales in January fell to their lowest level in over two years. In his State of the Union address on Tuesday night, President Trump reiterated his plan to limit the number of homes owned by large corporations. In response, Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma, commented that while the President’s remarks about prohibiting large companies from buying homes are theoretically beneficial to home builders, the stock price decline likely reflects the distorted situation in the housing market. He noted that interest rates are currently too high, and many people are trapped in low-rate mortgages, unable to move.
