Plunge in Mortgage Rates Are a Boon for PHM, KBH, MHO

Core Insights - The housing market is experiencing a positive shift due to falling mortgage rates, which have dropped to their lowest level in over a year, enhancing the purchasing power of potential homebuyers [1][2][5] Mortgage Rate Trends - The average rate for a 30-year fixed mortgage decreased to 6.47% for the week ending August 8, down from 6.73% the previous week, marking the lowest level since May 2023 [2] - The 15-year fixed mortgage rate also fell to 5.63%, down from 5.99% the prior week [2] Economic Factors Influencing Rates - Mortgage rates declined following a disappointing jobs report that raised recession concerns, leading to expectations of a Federal Reserve interest rate cut in September [3][4] - The personal consumption expenditures index increased by 2.5% year over year in June, a slowdown compared to previous months, prompting discussions of potential interest rate cuts by the Fed [3] Housing Market Dynamics - The drop in mortgage rates is expected to shift the housing market from a seller's to a buyer's market, as affordability issues faced by homebuyers are alleviated [5] - Increased housing market turnover is anticipated as prospective buyers, particularly millennials, are ready to make purchases [5] Company Performance and Outlook - PulteGroup, Inc. (PHM) has a Zacks Rank of 2 and a VGM Score of B, with a projected earnings growth rate of 13.3% for the current year and a return on equity (ROE) of 25.7% [7] - KB Home (KBH) also holds a Zacks Rank of 2 and a VGM Score of B, with an expected earnings growth rate of 19.2% for the current year [8] - M/I Homes, Inc. (MHO) has a Zacks Rank of 1 and a VGM Score of B, with a projected earnings growth rate of 20.8% for the current year and a net profit margin of 12.7% [9] Stock Performance - Year-to-date stock performance shows PulteGroup gaining 18.3%, KB Home increasing by 27.6%, and M/I Homes rising by 3.4% [9]