Economics
Homebuilders’ Rally Fizzles as Higher Rates Are Here to Stay
- Stocks fall about 8% in August after shooting higher in July
- KB Home, LGI Homes among those with steepest August declines
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Equity investors who piled into US homebuilders and fueled a 17% rally in their shares last month may be thinking twice after facing the reality that borrowing costs are likely to remain elevated for an extended period of time.
The $16 billion surge in July has lost steam as traders fret over the Federal Reserve’s steadfast focus on reining in inflation through higher interest rates and the possibility for recession. Now, economists at Goldman Sachs Group Inc. are predicting a further slowdown in the US housing market and are expecting home price growth to stall completely, averaging a flat 0% in 2023.