By Housing demand has been hard to forecast even as mortgage rates have declined. Just take a look at homebuilders’ quarterly results so far this earnings season.
Two of America’s largest homebuilders, Lennar (LEN) and KB Home (KBH), reported third quarter net new home orders that have fallen short of Wall Street expectations.
Net new orders represent the number of new sales contracts that have been finalized and signed by buyers minus customer home order cancellations booked for the period. Investors and analysts pay close attention to this figure because its a leading indicator for homebuilders on housing activity.
The uncertainty doesn’t appear to be going away despite the Federal Reserve’s jumbo interest rate cut in September. Mortgage rates had already been on the decline as investors had bet on a rate reduction ahead.
It’s unclear how much they’ll fall. Data from Freddie Mac shows the average 30-year fixed mortgage rate jumped by 20 basis points to 6.32% last week. This marks the biggest week-over-week increase since April.
Read more: Is this a good time to buy a house?
Goldman Sachs revised its year-end forecasts in early October for 30-year conforming mortgage rates, lowering them to 6% for this year and 6.05% for 2025, down from the previous estimates of 6.5% and 6.1%.
The firm’s strategists said in the note that there’s “limited room” for major declines. They think “the decline in mortgage rates has largely run its course.”
Lovallo warned that it’s highly likely that the other homebuilders will report misses on Q3 net orders due to rate volatility this summer. More builders are gearing up to report quarterly earnings in the next few weeks with PulteGroup (PHM) and NVR (NVR) reporting on Oct. 22 and DR Horton (DHI) on Oct. 29.
Dani Romero is a reporter for Yahoo Finance. Follow her on X @daniromerotv.
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