LOS ANGELES — 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 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. Builder stocks started the year strong, but lost ground in the April-June quarter as the average rate on a 30-year mortgagefueled expectations of the first Fed rate cut in four years. Mortgage rates are influenced by factors including how the bond market reacts to the Fed’s interest rate policy decisions.
Still, the BofA analysts and many economists contend that the recent pullback in mortgage rates already reflects a Fed rate cut. Mortgage rates tend to track the moves in the 10-year Treasury yield.
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