A Few Mortgage / Financing Tidbits We Think Builder Investors Should Be Eying

Research evidence excerpt

A Few Mortgage / Financing Tidbits We Think Builder Investors Should Be Eying

Equity Research

Industry Update — June 8, 2026

Homebuilders

Building Products

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A Few Mortgage / Financing Tidbits We Think

Builder Investors Should Be Eying

Our Call Sam Reid

Two topics, both mortgage related & relevant for housing investors: 1) Regional variations Equity Analyst | Wells Fargo Securities, LLC Sam.Reid@wellsfargo.com | 727-512-3872

in the 'golden handcuff' effect (w/ implications for turnover); 2) Rising FHA loan failures

Eric Cohen, CFA(topical for entry-level builders). Lots to unpack. Keep reading!

Associate Equity Analyst | Wells Fargo Securities, LLC

Eric.Cohen@wellsfargo.com | 212-214-8061

Big picture. Everyone knows about the 'golden handcuffs' (lucky homeowners trapped in

homes w/ low rate mortgages). Less appreciated: it's possible to cut the data regionally,

which we do in Ex 1-3; the 1-liner: high penetration of low-rate mortgages outside the

Sunbelt could be a reason why Sunbelt migration has slowed (Sunbelt = 60-65% of public

builder vols). And on FHA loans, fresh data (Ex 8) suggests high failure rates in '23/'24

vintage loans, a sign of entry level (DHI/LEN) buyer stress.

'Golden handcuffs' at the local level. 1) For context, 51% of mortgages are locked in at

sub-4%; that's well above '19 levels (+14pts) albeit -14pts vs. early '22 highs; 2) By region,

West coast/NE homeowners are most locked in (58%/51%), +12pts/+5pts vs. Sunbelt

homeowners (46%). Implications: move-up builders have historically sourced Sunbelt

buyers from places like CA/NJ/NY; thus, even higher-for-longer 'winners' like TOL/PHM

could see a step-up in Sunbelt demand should rates fall. If only...

FHA delinquency data = something to monitor. Govt-backed FHA loans (which