Will homebuilders benefit from lower FHA premiums?
Builders stocks surge on the news
Homebuilders are lauding the Federal Housing Administration’s news that it is reducing the annual mortgage insurance premiums by 50 basis point.
While the news isn’t good for private mortgage insurers who have been happily raking in market share gains at the expense of the government agency, the homebuilders are a different story, a Seeking Alpha article said.
The announcement is positive for first-time homeowners since it is projected that this reduction will translate into a $900 reduction in their annual mortgage payment.
Credit Suisse said KB Home (KBH) and D.R. Horton (DHI) most exposed to first-time buyers at approximately 50% and 40%, respectively, compared to Toll Brothers (TOL) and Meritage Homes Corporation (MTH), which see the least.
Most other builders have between 20-30% exposure, while Toll Brothers (~3%) and Meritage only see -3% and -10%, respectively.