Housing sales drop hits stocks of builders

Aslowdown in U.S. home sales is weighing on homebuilder stocks. Most of the builders are down more than 15 percent this year, even as the broader market has been on a milestone-setting run. The S&P 500, the market’s benchmark index, is up about 8 percent for the year.

Builder shares were already having a rough year as investors worried that rising mortgage rates could dampen sales. Those jitters appear to have been well-founded. A recent batch of weak housing data suggest the housing market is losing momentum despite an otherwise solid economy.

“The slowdown in activity is really related to prices,” said BTIG homebuilding analyst Carl Reichardt, adding that he expects many builders to report slow or flat earnings growth next year.

A growing economy and job market have boosted demand for housing, but higher mortgage rates and a tight inventory of homes on the market has made affordability a challenge for many would-be buyers.

Sales of new U.S. homes slumped 1.7 percent in July, the second straight monthly decline.

Sales of previously occupied homes have fallen four months in a row.

Builders have been aggressively raising prices for several quarters amid increased costs for lumber, steel and other building materials.

The industry has also been grappling with escalating cost for labor and land.

The average sales price of a new home climbed 5.8 percent in July from a year earlier to $394,300.

“The consumer is resisting that to some degree,” Reichardt said.

What does the weaker housing data bode for homebuilder shares?

Investors need to balance the slowdown in housing with trends that favor builders: a strong economy and persistent need for housing.

“That tension is creating an uncertain environment for the stocks,” Reichardt said.

“Absent new positive or negative change points, the stocks are probably adequately discounting this uncertainty.”

SAN FRANCISCO — If you already subscribe to digital services such as Netflix to binge on TV shows and Spotify to groove to an endless mix of music, the auto industry might have a deal for you: Subscribe to your next car too.

Make that cars, plural. Some of these packages — which charge a monthly fee for the bundled use of a car, insurance and maintenance — let you trade in your vehicle on a regular basis, sometimes almost as readily as you can skip to a new tune on Spotify.

These still-developing car subscription programs are gaining traction among motorists who don’t want to be locked into the hassles of car ownership or even multiyear leasing commitments. All they want is a vehicle available whenever they want or need it.

“It feels like Christmas morning every time they bring me a new car,” said Steve Barnes, a video producer who subscribes to a high-end vehicle subscription program offered through Clutch Technologies, a startup operating in the Atlanta area.

Although they’re still in their infancy, car subscriptions are hooking more motorists as both long-established automakers and startups roll out plans.

Ford, a 115-year-old automaker with a network of more than 3,000 dealers, expanded into car subscriptions about 16 months ago through Canvas, a subsidiary in San Francisco.

Canvas offers a variety of used, once-leased Ford and Lincoln models as subscriptions that cost anywhere from $379 per monthfor a Ford Fiesta subcompact to $1,125 per month for a Lincoln Navigator luxury SUV.

Those plans, however, impose driving limits of 500 miles a month. Subscribers can pay extra for higher limits: $35 per month for an additional 350 miles, for instance, or $100 per month for unlimited travel.

Unused miles in any given month can be rolled over to the next one. If Canvas customers exceed the monthly mileage limits under their plan, they are charged an additional 15 cents per mile for a Ford car and slightly more for a Lincoln vehicle.

Canvas has limited subscriptions to the San Francisco and Los Angeles area.

In its first 16 months in California, thousands have signed up for its subscription service while collectively driving about 8.5 million miles, according to the company.

“People are generally changing the way they are working, they are changing the way they are living, and they are generally changing the way they are consuming things,” Canvas CEO Ned Ryan said. “Subscriptions are going to be a very large and growing share of how people consume automobiles.”

About a third of Canvas customers decided to subscribe to cars after moving or some other major event that left them reluctant to make a bigger commitment to leasing or owning, Ryan said.

Others just like the simplicity and convenience offered by a car subscription, he said.