Housing Stocks Have Done Extraordinarily Well Despite Rising Mortgage Rates

NASAOn Dec. 18, the Federal Reserve announced it would taper its monthly purchases of Treasury and mortgage bonds, a stimulus program intended to keep rates low and lending activity up.

As expected, interest rates rose, with 30-year mortgage rates climbing 3.4% to about 4.5%.

But despite the rising cost of home ownership, homebuilder stocks have been among the best performers during this period, according to Morgan Stanley's Adam Parker.

That's because there was apparently enough momentum in the housing market to allow the housing market to power through any headwind rising rates may have caused. Housing starts were up more than 22% in November compared with October, and prices measured by Case-Shiller climbed for the 17th-straight month in October.

Parker:

"We should note that corporate events and company- specifics such as earnings reports, and macro drivers like strong housing data are also in some cases driving returns - and probably have nothing to do with the tapering. Overall, one clearly different conclusion is that home builders performed well recently due to strong housing data and were not negatively impacted by tapering this time the way the specter of higher rates negatively impacted them last May.

Here's the table:

Morgan Stanley