Shares of homebuilders took a significant hit on Friday as Treasury yields reached their highest level in 16 years, making new homes less affordable. The iShares U.S. Home Construction ETF (ITB) dropped 1.2% to a four-month low, with 43 out of 46 components experiencing losses.
Homebuilder Stocks Performance
Among the more active homebuilder components, D.R. Horton Inc. (DHI) declined 0.8%, Lennar Corp. (LEN) lost 0.9%, PulteGroup Inc. (PHM) fell 1.7%, and KB Home (KBH) gave up 2.3%. Home improvement retailer, Home Depot Inc. (HD), is also a component of the ETF and saw its stock fall 1.3%.
Impact of Treasury Yields
The rise in mortgage rates is directly tied to the yield of the 10-year Treasury note, which currently stands at 4.837%, a significant increase of 0.120 percentage points since the last closing yield on August 8, 2007. Additionally, the yield on the 30-year Treasury bond rose by 0.121 percentage points to 5.007%, crossing the critical 5% threshold for the first time since August 15, 2007.
Market Reaction
The homebuilder ETF has experienced a decline of 15.9% since reaching a record high of $89.31 on August 1. Over the same period, the 10-year Treasury yield has risen by 0.786 percentage points, while the broader market, as measured by the S&P 500 (SPX), has lost 7.6%. The volatile housing market remains under pressure due to the impact of higher financing costs on potential buyers.
