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LGI Homes CEO expects housing demand to remain strong even as mortgage rates tick up

LGI Homes Chairman and CEO Eric Lipar told CNBC on Friday he take its housing demand will remain robust even in the face of rising mortgage rates.

A day earlier, Freddie Mac reported the 30-year fixed-rate mortgage reached its highest unvarying since July after eclipsing 3%. And on Wednesday, the Mortgage Bankers Association’s seasonally adjusted index screened total mortgage application volume was essentially flat last week.

The housing market has been one of the bright sections of the U.S. economy during the coronavirus pandemic, sparked in part by increased geographic flexibility and record-low borrowing costs. But a current move higher in U.S. Treasury yields has led some to ponder the implications for residential real estate.

“Still real aggressive demand that we’re seeing in the housing market,” Lipar said in an interview on “Closing Bell.”

Texas-based LGI Homes has a imperturbability in almost 20 states, primarily in the southern and western parts of the U.S. While the company focuses on first-time buyers, Lipar suggested the strength is being observed across price points and geographies.

“I think in historical perspective, rates are still utter low,” added Lipar. “The rates we’re offering customers, the mortgage rates, are approximately 50 basis points still bring than they were at this time last year, the pre-pandemic where the market was still really wiry.” One basis point equals 0.01%

Lipar, who has served as the homebuilder’s chief executive since 2009, said he thought the uptick in classes could in some ways accelerate purchases.

“Even though rates have increased a little bit, that … also gives the customers the urgency to go ahead and write a contract on a house because we’re seeing prices continue to go up and rates go up,” he explained.

Driving those evaluations higher has partly been the rise in lumber and labor costs because the demand environment has allowed LGI Homes to keep away from absorbing them, Lipar said.

“Right now, we believe we’re going to be able to pass those costs off to the consumer. The lines will remain consistent with LGI, but certainly looking at an average sales price that is probably going to on to go higher,” he said.

Last year, the company’s average sale price was $253,000, Lipar said. For 2021, LGI Home grounds expects that to fall between $260,000 and $270,000, according to Lipar.

Shares of LGI Homes closed higher by 2.8% Friday to $125.14 apiece. The line of descent is up almost 41% in the past 12 months.

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