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Homebuilders are heating up

Excitement about Fed cuts is boosting the highly rate-sensitive industry.

7/16/24 4:38PM

Share prices for homebuilders are surging amid growing certainty that the Fed has vanquished inflation and rate cuts are on the way.

As Luke’s been writing, this is boosting excitement all over the markets, especially in the world of small capitalization stocks. But it’s especially welcome in the world of home construction, where Fed interest rates — and the mortgage rates that they help to set — are a key driver of activity.

Lower rates would not only help entice buyers back into the market, they could also offer some relief on the costs to homebuilders who have been forced to offer costly promotions like “rate buydowns” to entice would-be buyers, who might be turned off by mortgage rates that continue to hover around 7%, to pull the trigger.

That seems to be the reading from the stock market. Where share prices have made some fairly massive moves leaving some homebuilders at never-before-seen elevations. (PulteGroup, KB Home and Toll Brothers, for example, finished the day at an all times high.)

For the record, it’s possible traders are far too sanguine about a recovery in the sector, especially as surveys such as the National Association of Home Builders reading for July, released Tuesday, show very little in the way of actually optimism from the builders themselves.

But maybe the market — which we’re always told is “forward-looking” — knows something the hardhats don’t.

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American Airlines joins the flock, hiking bag fees amid higher jet fuel prices

American Airlines on Thursday announced that it, too, will be hiking the fees it charges customers to check luggage.

With the move, all four of the major US airlines, which together control about 80% of the US market, have now hiked their baggage fees in recent days amid surging jet fuel prices.

The change will go into effect on tickets bought on or after Thursday, the same day Southwest’s hike begins.

Since late March, JetBlue, Delta Air Lines, United Airlines, Canada’s WestJet, and Southwest have hiked their fees. Experts expect more major carriers to follow, and to potentially tweak the pricing of other ancillary revenue sources like seat assignments and carry-on luggage.

American Airlines updates bag fees and Basic Economy fares

The change will go into effect on tickets bought on or after Thursday, the same day Southwest’s hike begins.

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Less than a year after implementing them, Southwest is also hiking its bag fees

Southwest Airlines has joined the growing list of airlines opting to hike their bag fees amid sustained higher jet fuel costs.

Starting today, the first checked bag at the carrier — which implemented bag fees less than a year ago — will jump from $35 to $45, and the second from $45 to $55. Southwest quietly disclosed the change Tuesday.

Southwest assigned the decision to “part of an ongoing analysis of the business and against the evolving global backdrop.”

As of Wednesday, jet fuel prices dropped to $4.16 a gallon, per the Argus US Jet Fuel Index, down from $4.81 on Tuesday following President Trump’s ceasefire announcement, which sent travel stocks soaring. Major airlines have shed some of those gains in premarket trading Thursday.

With the move to hike bag fees, Southwest joins JetBlue, United Airlines, Delta Air Lines, and Canada’s WestJet, all of which also boosted fees this month. Experts expect more major carriers to follow, and to potentially tweak the pricing of other ancillary revenue sources like seat assignments and carry-on luggage.