The home-builder stocks have been one of the strongest industry groups in 2012. Today, the leading sector is starting to pullback. The small retreat in home-builder stocks could be due to the recent surge in yields on the 10-year T-note. When yields move higher it makes mortgages more expensive. Thirty-year mortgage rates have been at all time lows over the past few months.
The Ten-Year Effect
This morning, the yield on the 10-year T-Note was higher by 0.06 to 1.786%. Investors should know that yields on the 10-year T-note will have the most effect on mortgage rates. Bonds can be followed or traded by using the iShares Barclays 7-10-Year Treasury Bond Fund (NYSE: ARCA:IEF), and the iShares Barclays 20+ Yr Treasury Bond (ETF) (NYSE: ARCA:TLT).
A few home-builder stocks that are pulling back, today, include KB Home (NYSE: KBH), D.R. Horton Inc. (NYSE: DHI) and The Ryland Group Inc. (NYSE: RYL). Traders must remember that higher yields could have a negative effect on this particular industry group. At this time, yields are still near historic lows so the effects of higher yields are minimal. Also note that the recent uptick in U.S. housing could quickly sputter if yields start to rise rapidly.
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Home Builders Retreat
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