The Taylor Wimpey share price declined slightly even after the strong UK housing data. The TW stock declined by more than 0.60% on Tuesday and is trading at 176p. This price is about 4.5% below the highest level last week. Other homebuilders like Barratt Development and Persimmon also saw their share prices retreat.
UK home builders are in a fix. On the one hand, demand for homes is rising, which is pushing prices higher. This demand is driven by the relatively low interest rates and the tightening labour market.
And at the same time, there are imminent fears that the housing sector is starting to form a bubble that could burst when interest rates start rising. Also, the industry is seeing a higher cost of doing business as wages rise.
Data published by Halifax showed that UK home prices surged to a record as demand rose. The average home price rose by 7.1% in August to a record high of £262,954. On a monthly basis, home prices rose by 0.7%. The data confirmed another estimate by Nationwide that came out last week.
Higher home prices are usually positive for homebuilders like Taylor Wimpey and Persimmon. Indeed, in its most recent results, the company boosted its forward guidance citing the strong demand.
Still, it seems like investors are worried about fading demand after the stamp duty holiday ended.
The TW share price has struggled in the past few weeks. The stock has dropped from 185p to about 176p. The upward momentum appears to have lost steam as well. At the same time, the shares remain strongly above the 25-day and 50-day moving averages. It has also formed a small head and shoulders pattern.
Therefore, for now, the path of the least resistance for the stock is to the downside, with the next key level to watch being at 160p. This view will be invalidated if the price moves above the key resistance at 185p.