As the housing market is under mounting pressure, some are looking to the second quarter earnings reports from homebuilding giants Lennar (LEN) and KB Home (KBH). Yahoo Finance’s Josh Lipton joins Wealth! to shed light on the real estate sector’s dynamics and challenges.
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This post was written by Angel Smith
Video Transcript
Well, two home building companies will report their earnings this week for more on what it can mean for home buyers.
We bring in our very own, Josh Lipton, Josh, what are you seeing in the sector?
So yeah, get ready for a busy week for home builders.
We have two big names reporting.
So Lear offers its second quarter results.
That’s coming after the market closed today and then KB home reports its second quarter results.
Tomorrow, analysts say KB home sells mostly what a to as to be built homes, meaning buyers picked a lot and then head on over to a sales center and choose the home they want built most of Lear’s homes.
They point out are built with a predetermined fit and finished.
But a broader question here for investors and consumers, what is the general backdrop right now for would be home buyers for answers?
I checked in with Jay mccandless at Wedbush who covers the home builders.
Now, Jay says it is mixed with different puts and takes.
Yes, there is certainly demand.
He says out there for all kinds of prices and types of homes right now.
And that makes sense.
Demographics are supportive for the real estate market.
After all, there are a lot of American Gen Z and millennials out there who would very much like to buy a house of their own one day.
The problem of course, affordability, the average rate on a 30 year fixed mortgage is 6.95%.
It’s according to Freddie Mac.
So it is now back just under 7% here and that could drive some traffic.
But Jay argues it still does remain a real headwind for a lot of interested buyers.
Of course, there are home builders offering incentives to help move inventory right now.
That’s just why investors watch these companies mar margins so carefully.
When they do report bottom line, what do investors do with the stocks of these two home builders tells me that he currently has a neutral rating on KB home, which is where most analysts on the street are at right now.
In other words, they’re on the sidelines on Lear most financial analysts come this name actually do like it and rated a buy, but Jay has the equivalent of a sell on Lear arguing that valuation just not attractive at these levels.
Ali Yeah, the home sector is something that we’re continuing to watch very closely.
Thank you so much, Josh, appreciate it.
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