Home Builder Stocks Are Having a Fantastic Week. Here’s Why.

Home builder stocks are on track for their best week since late last year as U.S. Treasury yields slumped on Thursday. Lower yields could lead to a retreat in mortgage rates—but there’s more to like about these stocks right now, says one analyst.

Home builders’ jump follows an extended slide as higher mortgage rates weighed on buyers, sellers, and builders alike in the second half of the year. Mortgage rates measured by Freddie Mac recently rose for seven straight weeks to the highest point in 23 years before falling slightly this week. In a housing market defined by high costs and few homes for sale, lower rates are good news for builders. Unlike sales of previously owned homes, new home sales have remained strong. With relatively few homes for sale, buyers could be turning to builders for more options—but the companies can also offer incentives, such as mortgage rate buydowns, that are rarer in sales of existing homes.

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