On paper, the U.S. housing market remains constrained. Last week, mortgage purchase applications were down 35% on a year-over-year basis, as spiked mortgage rates continued to keep some buyers on the sideline, while the number of homes for sale in March 2023 was 20% below levels seen in March 2022 as "move-up" sellers refuse to swap their mortgage rates of around 2% to 3% for something in the 6% range. But a constrained national housing market doesn't equal a crashing housing market. At least that's the message from Wall Street, which has helped to push up the share price of major homebuilders, like D.R. Horton and Lennar, back near their all-time highs.
So what are investors seeing that buyers and sellers aren't? The new-home market has gained an advantage over the existing-home market. Not only does the existing/resale market have little inventory available for sale, it has also been stickier on the price side, with many sellers refusing to budge. That lack of competition, coupled with sky-high existing home prices, gives builders an edge if they're able to offer some discounts like mortgage rate buydowns.
