Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

IF YOU BUILD IT, THEY MIGHT NOT COME: HOMEBUILDER SENTIMENT INCHES UP

The mood among homebuilders has grown unexpectedly sunnier this month.

Or perhaps "a bit less morose" is a better way to put it.

The National Association of Home Builders' USNAHB=ECI housing market index (HMI) surprised to the upside by climbing 3 points to a still-dour 37, in defiance of economists who expected a repeat of April's 34 print.

The improvement stems from fewer price cuts, an uptick in sales expectations and a slight improvement in prospective buyer traffic.

Either way, builder sentiment remains sour, languishing well south of 50, the dividing line between pessimism and optimism in the sector.

“The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand,” writes NAHB Chairman Bill Owens.

The 30-year fixed mortgage rate has been coasting north of 6% since September 2022, according to data from the Mortgage Bankers Association. And with spiking energy prices and uncertainties related to the war on Iran, there's little to coax would-be homebuyers into the fray.

"The drop in consumers’ confidence and slowdown in population growth also are weighing on demand for new homes," says Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "Homebuilders also have excess inventory of unsold homes, dissuading them from starting new projects."

But while NAHB data is current as indicators go, all economic data is viewed through the rear-view mirror.

Housing stocks, on the other hand, reflect where investors expect the sector to be six months to a year in the future.

With that in mind, investors' view of the sector has begun to sour.

While housing-related indexes - the S&P 1500 Homebuilding Index .SPCOMHOME and the PHLX Housing Sector Index .HGX - handily outperformed the broader market in the first two months of the year, that advantage evaporated in March when the U.S.-Israeli war on Iran pushed interest rates higher, taking mortgage rates with them.

And in the latter half of April, the indexes have fallen behind the herd.

Year-to-date, the SPCOMHOME and the HGX are now down 11.0% and 5.6%, respectively. The S&P 500 .SPX is up 8.2% so far this year.

(Stephen Culp)

*****

EARLIER ON LIVE MARKETS:

BIG TECH'S MOAT MEETS AI'S TIDE: DISRUPTION OR DOMINANCE? CLICK HERE

WHAT SCENARIOS COULD FORCE THE FED TO HIKE RATES THIS YEAR? CLICK HERE

NOT MUCH POLITICAL RISK PRICED INTO THE POUND, YET CLICK HERE

FOREIGN INVESTORS KEEP SELLING SURGING KOREAN STOCKS CLICK HERE

BATTERY METALS BOOST? CLICK HERE

WAR WORRIES CATCH UP CLICK HERE

EUROPE BEFORE THE BELL: SEEING RED CLICK HERE

BONDS GET A TASTE OF OIL'S DEMAND DESTRUCTION CLICK HERE