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 about 38% year-to-date. This compares to the S&P 500 which remains up by about 14% over the same period. While rising interest rates and inflation impacted the housing sector in 2022, there are signs that the worst may be behind the market.
Inflation and supply chain challenges are also easing for the housing sector, helping input costs and prices. Retail inflation in the U.S. rose at just 4% for May, marking the lowest increase seen in about two years. The interest rate environment is also a bit more conducive. The Fed held interest rates stable during its most recent meeting and the average 30-year fixed rate mortgage in the U.S. stands at about 6.6% presently, down from November 2022 highs of about 7.1%. This could make financing new homes a bit cheaper.
The total number of new homes sold for the month of April stood at 683,000 units, up 11.8% versus last year’s number. Prices have also cooled a bit, with the median price of homes standing at $420,800 for the month, compared to about $458,200 in the year-ago quarter. Builders are also doubling down on new construction. For the month of May, groundbreaking on new single-family homes in the U.S. stood at a seasonally adjusted annual rate of 1.631 million units compared to 1.34 million for April.
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- Why Has Home Depot’s Stock Fallen 10% Since The Beginning Of The Year?
- Why Homebuilder Stocks Are Outperforming Despite A Tough Housing Market
There also remains a fundamental undersupply of homes, with a wide range of estimates projecting that the country may be short of anywhere between 1.5 million to 5 million homes.  This might indicate that housing players may still have solid demand visibility, with volumes and revenues likely to hold up.
Within our theme Pulte Group (NYSE:PHM) stock has been one of the strongest performers, rising by about 64% year-to-date. On the other side, HomeDepot (NYSE:HD) has been the worst performer, with its stock down by about 5% year-to-date.
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|S&P 500 Return||4%||14%||95%|
|Trefis Multi-Strategy Portfolio||6%||16%||262%|
 Month-to-date and year-to-date as of 6/22/2023
 Cumulative total returns since the end of 2016