US Real Estate Stocks Face Sell-Off Amid Rising Inflation Concerns

(MENAFN) Shares of American real estate companies and homebuilders dropped on Wednesday as stronger-than-expected inflation intensified expectations that the Federal Reserve could raise interest rates.

Financial markets began anticipating a 25-basis-point increase in December, while also considering the possibility of a larger 50-basis-point adjustment after both headline and core inflation figures exceeded monthly forecasts.

US government bond yields also recorded widespread gains ahead of the Veterans Day holiday, reflecting growing concerns about the direction of monetary policy.

The two-year Treasury yield, which is particularly sensitive to Federal Reserve decisions, climbed 17 basis points to reach 4.75%. Meanwhile, the benchmark 10-year Treasury yield advanced 13 basis points to 5%.

Higher long-term borrowing costs are also creating additional pressure on consumers, as mortgage rates generally move in line with 10-year Treasury yields, alongside an additional risk premium.

Real estate investment trusts (REITs) faced renewed selling pressure amid concerns that increased financing expenses could affect their profitability. Major homebuilding companies also recorded losses as rising bond yields raised concerns about housing demand and future sales.

Among the biggest decliners, Lennar shares dropped 5.4%, while Meritage recorded a 4.4% decrease. PulteGroup lost 3.9%, DR Horton declined 3.8%, and luxury property developer Toll Brothers fell 2.7%.

Market analysts warned that persistently expensive mortgages could further weaken housing affordability, potentially reducing demand for residential properties and slowing new home sales across the United States.

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