Mortgage rates continue to impact homebuyer affordability, with many buyers still on the sidelines.

Market Domination co-host Josh Lipton joins Yahoo Finance Senior Reporter Allie Canal on Wealth to discuss the latest data and what investors should watch for, including opportunities in Beazer Homes (BZH), Toll Brothers (TOL), and PulteGroup (PHM).

To watch more expert insights and analysis on the latest market action, check out more Wealth here.

Video Transcript

00:00 Speaker A

Well, a big week for housing data on deck as the issue of affordability continues to weigh on home buyers. Yahoo Finances Josh Lipton is here with a closer look. So, you've seen this very challenged home buying experience. What's the latest that you're watching?

00:16 Josh Lipton

Yes. Uh so listen, rates we know have been an ongoing headwind for the housing market. The average rate on your standard 30-year fixed mortgage, 6.92%. That's according to Mortgage News Daily. So, what does that mean for affordability? Well, middle-income home buyers making $75,000 could afford just 21% of the available listings nationwide in March. And that is compared with 49% in 2019, according to a recent report from Realtor, realtor.com and the National Association of Realtors. For households, by the way, earning $50,000 annually, they can afford only about 9% of home listings today. So when will affordability start to improve here? I asked analyst Lance Lambert who emphasizes that affordability is very strained.

01:23 Lance Lambert

Unless, you know, home prices were to fall meaningfully or mortgage rates were to come down half uh you know, one and a half percentage points, affordability is going to be in this strained environment. And so right now in the market, that's created additional choppiness for builders right here. It's still constraining turnover in the resale market. There's not many transactions happening for existing home sales and there's a lot of home buyers still on the sidelines.

02:20 Josh Lipton

So as we try and make sense now where the housing market is right now and where it could be headed next. More important data is on the way this week. Got earnings are on tap. Toll Brothers reports second quarter earnings results on May 20th. Then we get some existing home sales. That's coming on May 22nd, and new home sales on May 23rd. So where can there be potential opportunities for investors in this sector? I checked in with Jay McCanless over at Wedbush. For a small cap play, he likes Beazer Homes, which he argues is attractively valued and at the leading edge of more energy-efficient homes. In the large cap space, Jay tells me that the luxury home buyer is still holding up relatively better. So he likes Toll Brothers, and he's also a fan of PulteGroup. Ali.

03:27 Speaker A

Oh, always a lot going on in this sector, Josh. Thank you for tracking that all for us.

03:33 Josh Lipton

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