The top-ranked homebuilders group continued to break down Tuesday, even as new home sales jumped to a 13-month high in April. Housing giants D.R. Horton and Lennar sold off sharply in today's stock market action.
Just after the market open Tuesday, the Commerce Department said new home sales increased 4.1% to a seasonally adjusted annual rate of 683,000 units in April, the highest reading since March 2022. Econoday estimates expected a reading of 670,000. But March's numbers were revised lower to 656,000, from the previously announced 683,000 units.
Further, the median new house price in April dropped to $420,000, an 8.2% fall vs. the year-ago period. That's the lowest median sale price for a new home since December 2021.
Meanwhile, the 10-year Treasury yield continues to rebound from early-May lows and is at its highest level since March 10. The 10-year yield ticked higher to 3.73% Tuesday, on pace to extend a win streak to eight session. Finally, according to Bankrate, the average 30-year fixed mortgage rate is back above 7%. Higher interest and mortgage rates will reduce housing demand.
Homebuilders D.R. Horton, Lennar Slide
Homebuilders remain one of the stock market's top performers, but cracks are starting to appear, with leading components starting to fall sharply. Six weeks ago, the group ranked a lofty No. 10 — and this week it ranks second out of 197 groups. Investors should focus on the top stocks within the top 40 industry groups.
D.R. Horton slid 2.5% Tuesday, falling to its lowest level since April 19. Shares remain above a 99.50 buy point in a cup with handle, according to IBD MarketSmith chart analysis.
On April 20, D.R. Horton easily beat earnings and revenue estimates for the second quarter early Thursday, while giving upbeat revenue guidance for the full year.
In an earnings release, this leading homebuilder said "the spring selling season is off to an encouraging start." It added that demand improved during the quarter due to "normal seasonal factors," despite higher mortgage rates and inflationary pressures.
Lennar shares are testing their 50-day line, falling more than 3% Tuesday midday. LEN stock is also trying to hold above its recent cup-with-handle buy point at 106.23.
Meritage Homes Flashes Sell Signal
Meritage Homes was axed from IBD Leaderboard Tuesday, as the stock tumbled more than 3% midday Tuesday.
Shares are flashing a sell signal, breaking down below the 50-day moving average. Tuesday's volume is tracking sharply above average, which indicates institutional selling. Meanwhile, the entirety of the stock's double-digit gain from a 117.32 cup-with-handle buy point is also gone. That bearish action triggers the round-trip sell rule.
Other Homebuilders Continue To Fall
Other homebuilders fell sharply Tuesday.
NVR declined nearly 2% midday, threatening to fall below its 50-day line for the first time since Nov. 9.
KB Home dropped 2.3%, falling through its 21-day moving average but still above a 40.77 cup-with-handle buy point.
Finally, PulteGroup lost 2% and is below its 21-day line. Shares are still squarely above a 60.99 cup-base entry.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on homebuilders and the Dow Jones Industrial Average.
