Housing stocks see split reaction on coronavirus vaccine news, as mortgage rates jump
Rick Nazarro of Colonial Manor Realty talks with a pair of interested buyers in the driveway as a couple waits to enter a property he is trying to sell during a "controlled" open house on May 2, 2020 in Revere, MA.

Homebuilder stocks are taking a hit, while apartment REITs are finally crawling out of the basement amid a massive market rally sparked by Pfizer's announcement Monday that early trial data show its coronavirus vaccine to be highly effective.

As investors digest the news, suddenly the pandemic housing picture looks a little different.

The nation's homebuilders have been benefiting from the stay-at-home culture of Covid, as people looked for larger, more high-tech homes in the suburbs. Working and schooling from home had been top of mind, but an effective vaccine could reverse that.

Stocks of the biggest builders like DR Horton , Lennar , Pulte and luxury builder Toll Brothers , were down at midday Monday. The iShares U.S. Homebuilding ETF , which includes home improvement retailers like Home Depot , Sherwin Williams and Masco , was also taking a hit.

Part of that also has to do with mortgage rates, which set yet another record low last week but appeared to be turning around Monday with a sell-off in the bond market. Mortgage rates follow loosely the yield on the 10-year U.S. Treasury, which surged to the highest level since March.

"Bond weakness is starting to snowball in a way we haven't seen since the crazy volatility in March, and this time around there are no concerns about liquidity and smooth market functioning," said Matthew Graham, chief operating officer at Mortgage News Daily. "That makes the current move very serious."

All this, however, looks like good news for the big apartment REITs, like Equity Residentia l, Avalonbay , and UDR . Apartments not only benefit when the cost of housing goes up, but there is clearly a feeling that a vaccine will get people back to work, back to the nation's downtowns and turn urban flight around.

"Clearly there is enthusiasm, but it doesn't take away from the fact that rents are down over 20% in many of the major urban gateway markets, with companies still letting employees work from home into middle of 2021," said Alexander Goldfarb, a REIT analyst with Piper Sandler. "There is a lot more earnings pressure to come."

Goldfarb is also concerned that there are other social and economic ramifications that could keep people from rushing back to the urban core, especially on the coasts, where Covid restrictions have been tighter and local economies have suffered more.