Shares of PulteGroup Inc. took a significant 5.7% nose-dive in afternoon trading on Tuesday, making it the leading decliner among S&P 500 stocks. The drop in stock price is primarily due to concerns regarding the potential impact of rising Treasury yields on new home purchases. This decline marks the largest one-day selloff for the homebuilder since its 6.2% tumble on Oct. 19, 2022.
It is worth noting that four out of the ten biggest decliners in the S&P 500 are homebuilders, including PulteGroup. D.R. Horton Inc. saw its shares slide by 5.0%, while Lennar Corp. and NVR Inc. experienced a drop of 4.9% and 4.7%, respectively.
The 10-year Treasury yield, which plays a significant role in determining consumer borrowing rates like home mortgages, witnessed an increase of 0.087 percentage points to 4.260%. This rise has led to concerns regarding persistently high inflation rates.
Due to skyrocketing home prices and increasing mortgage rates in the United States, many prospective homeowners are finding it challenging to afford homeownership. Consequently, this affordability issue is causing them to remain on the sidelines. According to Jason Pride, Glenmede’s Vice President of Investment Strategy, climbing interest rates generally reduce demand and lead to a decline in housing prices.
The impact of these concerns is reflected in the iShares U.S. Home Construction ETF’s 4.6% decline, with all 48 of its equity components experiencing losses.
