Real Estate
Leading Builder Says Housing Demand Hit By Uncertainty On Interest Rates, Economy
While the outlook for the housing market largely remained unclear, mortgage rates are falling again.
March 26, 2023
U.S. homebuilder KB Home said this week that net orders in the first two-and-a-half weeks of the ongoing second quarter fell 24% from last year.
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The company, which has multiple projects in San Diego County, issued a rare mid-quarter update Wednesday due to the ongoing market volatility fueled by a banking crisis.
The California-based KB Home expects net orders for the second quarter of between 3,000 and 3,700, a 14% decline when compared with the midpoint of the range from a year earlier. At that time, steady employment and wage growth fueled housing demand.
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“Interest rate and economic uncertainties posed a large risk to the near-term demand,” Chief Executive Officer Jeffrey Mezger said on a post-earnings call with analysts.
While the outlook for the housing market largely remained unclear, mortgage rates, which in February resumed their upward trend, are falling again in tandem with a sharp fall in U.S. Treasury yields after the recent turmoil in the banking sector sparked fears of contagion.
Interest rates on the most popular U.S. home loan tumbled to a four-month low last week after emergency measures taken to shore up the wider banking system drove a dash by investors to the safety of government bonds, the Mortgage Bankers Association said on Wednesday.
“The banking crisis could lead to a little bit of injection of life into the housing market by lowering mortgage rates,” said Lisa Sturtevant, chief economist at Bright MLS.
KB Home reported better-than-expected first-quarter revenue, sending its shares up by 3% after the bell.
The company’s new local projects include the Terraces in Lemon Grove, Ridgeview and the Foothills in San Marcos, Aurora and Crestline in Spring Valley, Sundance at Park Circle in Valley Center and Silverado in Vista.
– Reuters and staff reports
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