:max_bytes(150000):strip_icc()/GettyImages-2410216-21307a4a415d411d81f52f5ba990d5c3.jpg "Homebuilder Stocks Rise as Fed Rate Cut Looks Good For Mortgages")
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Key Takeaways
- Homebuilders shares rose after the Fed announced a 50 basis point interest rate cut Wednesday.
- Bank of America increased its price target for seven hombuilders by an average of 11%.
- Lennar will report earnings after the bell Thursday, with KB Home reporting next week.
Homebuilder stocks are rising a day after the Federal Reserve kicked off its rate-cutting cycle, lowering the benchmark rate by half a percentage point.
A lower federal funds rate exerts downward pressure on mortgage rates, which are a bit below 6%. That has helped lift shares of homebuilders such as KB Home (KBH), Smith Douglas Homes (SDHC), and Lennar Corporation (LEN) higher Thursday.
Bank of America analysts are bullish on the sector, raising their price targets for seven homebuilding companies by an average of 11%. The biggest boost went to KB Home, which had its price target bumped 20% to $90 from $75. Shares of the Los Angeles-based company rose about 3% Thursday.
Lower mortgage rates should drive more housing demand, the analysts wrote in a note Thursday, which should in turn improve sales and margins for homebuilders. Additionally, homebuilders have done a better job at returning capital to shareholders.
Lennar is expected to report earnings after the bell today. KB Home will report on Sept. 24.
August existing-home sales fell, according to fresh data.