Homebuilders are enjoying this turn of events after a gnarly second-half last year, when fears of rising interest rates slowing demand had forced them to cut prices and offer incentives to boost sales.
The shortages have powered homebuilders' earnings, sending their stocks soaring, with the S&P Composite 1500 Homebuilding Sub IndexThe current average rate of above 7% on the popular 30-year fixed mortgage, according to the Federal Reserve Economic Data, compared to below 5% that 80% homeowners have per a recent survey by Zillow, is making upgrading homes less attractive.
It is thereby squeezing the pool of existing homes, which are typically more affordable than new construction. The number of newly listed homes, of which existing homes usually make up a majority, was down 24.8% in July from a year earlier, according to data from real estate broker Redfin.in a post earnings call on Wednesday, as it announced a 10% sequential rise in price in the quarter ended July.