Rising mortgage rates hit home builders as buyers pull back

>>WE START WITH KMBC 9’S DENNIS EVANS DENNIS YOU HAVE SOME ADVICE FOR ANYONE LOOKING TO BUY A HOUSE. >> YES DEFINITELY I SPENT THE , DAY TALKING WITH LOCAL REAL ESTATE AGENTS AS WELL AS PEOPLE IN THE LENDING INDUSTRY, THEY SAY DESPITE THE FACT THAT RATES ARE ON THE RISE, IF YOU SEE ONE OF THESE SIGNS IN A FRONT YARD AND YOU ARE INTERESTED YOU MIGHT WANT TO STOP. GRAB IT BECAUSE THE HOUSE WILL NOT BE AROUND FOR LONG THE FED . THE FED IS NOT DIRECTLY TIED INTO THE FUND THAT CONTROLS MORTGAGE RATES. BUT IT STILL HAS A HUGE IMPACT ON THE MARKET. NOW, THE NEWS OF TODAYS RATE HIKE DIDNT COME AS A BIG SURPRISE TO PEOPLE IN THE MORTGAGE AND REAL ESTATE INDUSTIRES,THIS HAS BEEN TALKED ABOUT FOR THE PAST FEW WEEKS, IN A MARKET LIKE THIS PEOPLE ARE TRYING TO FIGURE OUT HOW TO GET THE MOST HOME THAT THEY CAN AFFORD, THE MOST BANG FOR THEIR BUCK WHILE STAYING WITHIN A , BUDGET THAT MAY HAVE TO CHANGE BASED UPON RISING HOME PRICES INTEREST RATES. >> I THINK PEOPLE ARE GOING TO BE A LITTLE BIT MORE CAUTIOUS. IT IS A GREAT TIME TO GO OUT BECAUSE RIGHT NOW NOT EVERY HOUSE IS GOING 30,000 OR 100,000 OVER ASKING. >> A LOT OF THOSE ARE COMING BACK TO THE MARKET BECAUSE THEY ARE GETTING STICKER SHOCK. I HAVE COULD BUY A HOUSE FOR 100000 AND NOW IT IS 350. >> THAT IS THE HUGE DIFFERENCE BETWEEN GETTING A BIG HOME THAT IS YOUR DREAM HOME AND A HOME THAT IS A NICE HOME SOMETHING THAT YOU WANT TO LIVE IN AND IS COMFORTABLE. ALL OF THAT MAKES ACUTE DIFFERENCE

Prospective home buyers are getting hit by a double whammy of bad news: Prices remain prohibitively high for many consumers, largely due to low supply. Mortgage rates have also skyrocketed to their highest level in 14 years.That is weighing on demand for both new home construction as well as sales of existing homes on the market. Home builders Lennar and KB Home both reported their latest quarterly results Wednesday afternoon. The two companies each posted a profit that topped analysts' forecasts, but revenue was below Wall Street's expectations."Sales have clearly been impacted by rising interest rates," Stuart Miller, Lennar's executive chairman, said in the company's earnings release. Miller added that "there remains a significant national shortage of housing, especially workforce housing, and demand remains strong."Lennar also reported that orders for new homes fell 12% from a year ago and that it is trying to "navigate the rebalance between price and interest rates."Mortgage rates are likely to head even higher given the Federal Reserve's series of big interest rate increases and likely plans for even more hikes in the coming months.KB Home chairman and CEO Jeffrey Mezger said in Wednesday's earnings report that "the combination of rising mortgage interest rates, ongoing inflation and other macro concerns has caused many prospective buyers to pause on their homebuying decision."Shares of KB Home fell 5% Thursday following its earnings report. Lennar rose 2%. But both stocks have plunged this year along with other builders. Lennar's stock is down 32% in 2022 while KB Home's shares have plummeted 40%.The SPDR S&P Homebuilders ETF, which owns these two stocks and shares of other housing related companies such as air conditioner maker Carrier and retailers Home Depot and Lowe's, is down 35% this year.

That is weighing on demand for both as well as on the market. Home builders Lennar and KB Home both reported their latest quarterly results Wednesday afternoon. The two companies each posted a profit that topped analysts' forecasts, but revenue was below Wall Street's expectations.

"Sales have clearly been impacted by rising interest rates," Stuart Miller, Lennar's executive chairman, said in the company's earnings release. Miller added that "there remains a significant national shortage of housing, especially workforce housing, and demand remains strong."

Lennar also reported that orders for new homes fell 12% from a year ago and that it is trying to "navigate the rebalance between price and interest rates."

Mortgage rates are likely to head even higher given the and likely plans for even more hikes in the coming months.

KB Home chairman and CEO Jeffrey Mezger said in Wednesday's earnings report that "the combination of rising mortgage interest rates, ongoing inflation and other macro concerns has caused many prospective buyers to pause on their homebuying decision."

Shares of KB Home fell 5% Thursday following its earnings report. Lennar rose 2%. But both stocks have plunged this year along with other builders. Lennar's stock is down 32% in 2022 while KB Home's shares have plummeted 40%.

The SPDR S&P Homebuilders ETF, which owns these two stocks and shares of other such as air conditioner maker and retailers Home Depot and Lowe's, is down 35% this year.

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