Why Homebuilder Stocks Are Soaring This Year

Our theme of Housing Stocks, which includes the stocks of home builders, building products companies, and home improvement players, has fared well thus far in 2023, rising by a solid 50% year-to-date. This compares to the S&P 500 which remains up by about 19% over the same period. While rising interest rates and high inflation impacted the housing sector in 2022, things are clearly improving for the housing market this year.

The total number of new single-family homes sold for the month of May, the most recent data reported by the U.S. Census Bureau, stood at a seasonally adjusted annual rate of 763,000 units, up 20% versus last year’s number. Prices have also cooled a bit, with the median price of homes standing at $416,300 for the month, compared to about $450,700 in the year-ago quarter. That said, housing starts for single-family homes declined a bit in June, and permits for future construction rose 2.2% to a rate of 922,000 units, the highest level since June 2022. Inflation and supply chain challenges are also easing for the housing sector, potentially helping input costs and prices for builders. Retail inflation in the U.S. rose at just 3% for June, marking the lowest increase seen in over two years.