Lennar, Pultegroup lead homebuilder stock surge after inflation pace slows

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Homebuilders, among some of the hardest-hit stocks after the Federal Reserve's rate hikes pushed mortgage rates to 7%, are among the best-performing stocks in Thursday midday trading.

A slower-than-expected pace of inflation triggered a rally in bond prices, which lowers their yield. The 10-year Treasury yield fell to below 4%, at 3.86% in midday.

That portends an easing in mortgage rates. The 30-year fixed-rate mortgage rate re-crossed the 7% mark, reaching 7.08% for the week ended Nov. 10, according to Freddie Mac.

Real estate, up 6.7%, is the best-performing S&P 500 industry sector in Thursday trading.

The iShares U.S. Home Construction ETF (BATS:ITB) rose 11%, its biggest one-day gain since spring of 2020.

By name, D.R. Horton (NYSE:DHI) climbed 11%, Lennar (NYSE:LEN) surged 13%, KB Home (NYSE:KBH) +12%, PulteGroup (NYSE:PHM) +13%, and Toll Brothers (NYSE:TOL) +12%.

But even with today's impressive jump, the ITB is 22% lower than it was a year ago.

Real estate brokerages stocks are also advancing strongly. Anywhere Real Estate (HOUS), formerly Realogy, rose 7.8%, Re/Max (RMAX), +6.9%, Zillow (ZG) class A stock rise 10% and class C (Z) stock +11%. iBuyer Opendoor Technologies (OPEN) soared 31%, and Offerpad Solutions (OPAD) +11%.Redfin (RDFN), surged 30% rebounding from a 12% drop on Wednesday after it announced layoffs and the closing of its house-flipping business.

SA contributor James A. Kostohryz sees Thursday's CPI report opening a window of opportunity for bond and equity markets to rally.