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Off the Charts-Homebuilder Stocks
New homes are shown under construction in Wheeling, Ill., Monday, Aug. 26, 2024. (AP Photo/Nam Y. Huh)

Rally over? Homebuilder stocks' big gains may have already priced in Fed rate cut

Homebuilder stocks are having a banner year, outpacing the broader market on a wave of optimism that mortgage rates will fall and juice home sales

By ALEX VEIGA
Published - Sep 19, 2024, 06:01 AM ET
Last Updated - Dec 16, 2024, 07:06 PM EST

LOS ANGELES (AP) — Homebuilder stocks are having a banner year, outpacing the broader market on a wave of optimism that mortgage rates will fall and help juice home sales into 2025.

The S&P Composite 1500 Homebuilding Index, which includes 16 stocks, including homebuilders Lennar, D.R. Horton, KB Home and PulteGroup, is up about 29% so far this year. while the benchmark S&P 500 has risen about 18%.

The sector typically notches gains in the months surrounding the start of a Federal Reserve rate cutting cycle. But analysts say there's reason to be skeptical that builder stocks will remain on a tear this time.

“We see a few key risks to the recent rally,” analysts at BofA Securities wrote in a research note this week.

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