The Federal Reserve is raising interest rates, and that's
led some to worry that mortgage rates will spike and put an end to the housing
boom in the United States.
Not so fast, according to the head of a big homebuilder.
Stuart Miller, executive chairman of Miami-based builder
Lennar, said Tuesday that "concerns about rising interest rates and
construction costs have been offset by low unemployment and increasing
He added that there is still a "short supply" of
houses on the market after "years of underproduction of new
homes." And he said "demand remained strong" and
"affordability remained consistent" thanks to rates that remain
Miller made those remarks in Lennar's earnings release
Tuesday morning. The company reported revenue and profits that topped Wall
Shares of Lennar (LEN) surged
more than 7% on the news. Rival builders Pulte (PHM), DR
Brothers (TOL) and KB
Home (KBH) all
Lennar's results are an encouraging sign for the group,
which has been hit hard this year on fears that higher interest rates will
start to take a bite out of demand for new homes.
Builder stocks have been hit hard this year, with many of
them -- including Lennar -- falling more than 20% in 2018.
But Lennar's results and other recent data may be assuaging
fears that the bottom is going to fall out of the housing market.
The federal government said Monday that new home sales in
May were better than expected, citing particular strength in the southern part
of the US.
That should be good news for the broader economy.
Lewis Alexander, chief US economist at Nomura, said in a
report Tuesday that he was raising his GDP estimate for the second quarter,
citing the stronger home sales figures and expectations of higher broker
And according to the closely watched S&P Case-Shiller
index that was released Tuesday morning, home prices continued to rise across
the country -- with 17 of the 20 cities tracked in the index registering
"Given the combination of strong demand and lean
inventories, especially for existing homes, we expect home prices to continue
appreciating at a modest pace for the remainder of the year," said
Barclays economist Pooja Sriram in a report Tuesday.
As long as the housing market remains stable, that should
give consumers more confidence. To that end, the government reported strong
retail sales figures for May earlier this month.
And it was led by healthy gains at home-improvement stores
like Home Depot (HD) and Lowe's(LOW).
These chains tend to do well when people are looking to sell their home.
here for the original article from CNN Money.