Major real estate stocks took a beating this week on concern that rising costs for everything from raw materials to the price of a hotel room could lead to higher interest rates, cutting consumer demand.
A Standard & Poor’s index of homebuilder stocks dropped 4.4 percent for the week, while Lennar, the biggest U.S. homebuilder, dropped almost 8 percent.
Soaring demand for homes during the pandemic had builders working at a furious pace, with housing starts up 20 percent from a year ago and the homebuilder index up 110 percent.
“Double-digit inflation in home prices may freeze first-time buyers out of the market,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association.
Rising inflation could also prompt the U.S. Federal Reserve to raise benchmark interest rates. That would increase the cost of home mortgages and dampen demand in many sectors of the…