After the FOMC meeting this week, the Fed's attitude softened beyond expectations, and the official announcement that “discussions on interest rate cuts have begun,” and all asset classes began a carnival upward pattern.

As expectations for the Fed's interest rate cut continue to heat up, the scope of the recent rebound in US stocks is not limited to technology stocks and AI concept stocks that led the year. One sector in the US stock market is quietly hitting new highs — that is, the US housing builder sector, where “stock god” Buffett built a new warehouse this year.

According to statistics,$SPDR S&P Homebuilders ETF (XHB.US)$The increase of nearly 60% this year has reached a record high, with a cumulative increase of over 37% since the end of October; at the same time,$iShares US Home Construction ETF (ITB.US)$It also reached a new high overnight, rising as high as 70% during the year, far outperforming the Nasdaq Composite Index, which is dominated by technology stocks.

According to Futubull$Residential Construction (BK2005.US)$According to sector statistics, since expectations of interest rate cuts at the end of October have continued to heat up, the stocks of these homebuilders have ushered in a wave of strong gains. Among them, Buffett has entered a new position this year$D.R. Horton (DHI.US)$,$Lennar Corp (LEN.US)$,$NVR Inc (NVR.US)$Stock prices have all broken through record highs. The three companies have risen 50.92%, 49.16%, and 28.84% respectively in the past six weeks. This year's increases were as high as 73.38%, 73.39%, and 50.34%.

How long can the strength of US real estate stocks last?

As the Federal Reserve suggests that the threat of inflation is receding, and the bitmap suggests that interest rates will be cut three times in 2024, there are opinions that the market may be cautiously optimistic about the prospects of homebuilders.

Robert Dietz, chief economist at the National Association of Home Builders (NAHB), said:

Although builders' confidence declined again in November, recent macroeconomic data suggest that housing construction will improve over the next few months. Given the insufficient inventory of existing housing, a slight decline in mortgage interest rates will affect housing demand and may lay the foundation for an improvement in builders' views on market conditions in December.

Notably, Freddie Mac said in a statement on Thursday that the average interest rate for a 30-year fixed loan in the US is 6.95%, down from 7.03% last week, falling below 7% for the first time in four months.

Freddie Mac's chief economist Sam Khater said in a statement:

Given that inflation continues to slow, and the Federal Reserve currently expects to lower the federal funds target interest rate next year, we may see a gradual thaw in the real estate market in the new year.

However, Bankrate.com chief financial analyst Greg McBride believes that falling below the 7% threshold may trigger some additional demand from potential buyers, but it won't change supply — at least not immediately — so the frustration of high housing prices and limited options will persist.

Bank of America Global Research said that as 10-year Treasury yields continue to decline, the valuations of homebuilders have risen sharply in the past two months. They said “the recent reratings are reasonable” and are likely to continue because lower interest rates are likely to benefit the sale of new homes and boost the profits of homebuilders.

Additionally, as mortgage interest rates fall, builders are likely to reduce incentives, thereby boosting their profits, according to a Bank of America report.

According to Ellen Zentner, chief economist at Morgan Stanley, predicts that homebuilder activity will increase next year, thereby easing the current supply crunch. Housing prices are expected to fall slightly over the next few months as inventory levels ease and mortgage interest rates fall. Zentner says:

We expect housing sales to be weak in the first half of next year, but housing sales activity should pick up in the second half of the year and even 2025, mainly because affordability will improve. As the tight supply situation eases, housing prices should drop to a certain extent. At the same time, due to lower interest rates, it can promote an increase in the sales volume of existing homes.

Furthermore, it is worth mentioning that judging from the time when stock god Buffett bought real estate stocks in the second quarter of this year, Buffett did not look at the bottom, but bought at the “high point” of the stock price, because as early as March and April of this year, Houghton House had already broken through record highs.

He still boldly buys even after stock prices break through record highs, which means Buffett believes that the performance growth of real estate stocks is a long-term logic. Looking at the real estate market as a whole, the US new housing market is expected to enter a stage of “rapid rise in volume and price” for a long time.

Cow friends,

Are you optimistic about the next performance of homebuilders?

Welcome to leave your wonderful opinions in the comments area~

Editor/Somer