Fed Policy and High Rates Squeeze Housing Market, Impacting KB Home
What happened
Following a unanimous quarter-point rate hike by the Federal Reserve, existing-home sales fell 1.2% year over year in August, reaching an annualized pace of 3.98 million, which is the weakest reading in a year. KB Home deliveries fell 19% year over year, while D.R. Horton's cancellation rate climbed to 20%.
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Why it matters
The Federal Reserve is accepting a frozen housing market to combat inflation, with the 10-year Treasury yield near 5% offering no near-term relief. Buyers are currently caught between record home prices and the highest financing costs of the cycle.
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Who's involved
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- KB HomeSpeculative
KB Home could see reduced sales volume and lower revenue as high interest rates decrease buyer affordability.
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The entities involved
Related events
- Fed policy decision affects market sentiment.
- The Fed took actions related to fighting, while Bank of America set market expectations for future Fed rate hikes.
- Fed policy influences market expectations.
- The Federal Reserve is focusing on how inflation impacts consumer prices and is communicating its policy through financial news channels.
- Market reacts to Treasury debt announcements.