Homebuilders pared gains Wednesday after the Federal Reserve announced a quarter percentage point rate cut, brining its funds rate to a range of 4% to 4.25%. IPO stock Millrose Properties leads a group of housing stocks setting up amid the announcement.
The Federal Reserve's federal funds rate indirectly affects mortgage rates. A cut to Fed interest rates generally prefaces a reduction in mortgage rates. Lower mortgage rates, in turn, typically spark demand for refinancing or new home purchases. Lower interest rates could potentially reduce borrowing costs for homebuilders and construction companies. But inflation pressures, another factor of rate cuts, could drive up home construction materials and labor costs.
Stock chart action shows many housing stocks trending toward possible entries or buy zones after Fed decision Wednesday.
Millrose Properties eased 1.4% Wednesday, reversing from its 1% gain in early trade. Shares slid 1.7% on Tuesday. The residential land developer completed its spinoff from Lennar in early February. Unlike typical homebuilders, Millrose specializes in the acquisition, preparation and sale of land to construction firms, who then build the homes.
The capital from sales is recycled into future land acquisitions for homebuilders, providing customers with uninterrupted access to capital, according to the company's prospectus.
It offers advantages over traditional land banks, where sites may not have all building permits and carry other risks.
Millrose has rallied nearly 80% from its low of 19 during its New York Stock Exchange debut on Feb. 5, according to MarketSurge charts.
MRP shares have found support above their 21-day exponential moving average. Millrose Properties could form a flat base with a 36 buy point if given another week. That entry matches its high from Aug. 28.
Aggressive investors could plot early entries at 35.28 and 36.
Homebuilders And Housing Stocks Set Up
Most stocks in the homebuilders industry group have been grinding through long, deep consolidations. Among the best-looking charts, Green Brick Partners is working up the right side of a deep cup base, toward an 84.66 buy point. Shares pared their Wednesday gain to 0.14%. GBRK stock has rebounded about 43% from its early April lows.
DR Horton declined 1% Wednesday, after attempting a rebound off its 21-day line back into a cup-with-handle buy zone. Shares retreated out of the buy zone on Monday. DHI stock is up nearly 22% so far this year.
PulteGroup is also trading near the bottom of a cup-with-handle buy zone, with a 133.67 entry for its base. The buy zone, which stretches 5% beyond the buy point, extends to 140.35.
In the adjacent, mortgage finance industry group, loanDepot has soared 113% so far in September. Although it trades below 5 and is not basing, the mortgage product provider has been a recent favorite of the WallStreetBets and Ape Wisdom trading crowds.
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