What's happening to the Taylor Wimpey share price?

He Taylor Wimpey (LSE:TW.) share price saw an impressive rally in the second half of 2023 despite tough operating conditions.

The stock of homebuilders increased 39.6% over the past 12 months, with much of that growth coming in the latter part of the year.

In fact, in six months, the stock is up 42.5%.

So what's happening to the Taylor Wimpey share price?

Interest rates are key

Higher interest rates pose challenges for homebuilders by increasing borrowing costs, reducing home affordability for buyers and potentially curbing demand. This can affect property prices, investor confidence and project viability.

There are several additional angles on how rising rates influence the market, but a year ago, some analysts were suggesting we could see home prices fall by 20%. That certainly hasn't happened.

So from a macroeconomic perspective, we have seen several positive developments. As the year progresses, the housing market has proven to be much more resilient than many expected, partly driven by the acute housing shortage in the UK.

And interest rates have peaked while inflation appears to be moving in the right direction. Towards the end of 2023, traders began to factor in base rate cuts from the Bank of England, leading to higher prices for housebuilders.

Performing well

On January 11, the housebuilder said that, despite market uncertainties, management anticipated full-year profits to be at the upper end of the range of £440m to £470m.

The company reported 10,848 total completions in 2023, up from 14,154 in 2022, citing challenging market conditions.

The net private sales rate also decreased to 0.54 from 0.65 in 2022. However, private completion prices increased by 5.1% to £370,000.

CEO Jennie Daly expressed optimism amid declining mortgage rates but acknowledged near-term uncertainty and planning challenges.

Despite a reduced order book of £1.77 billion (representing 6,999 homes, down from 7,499 at the end of 2022), Taylor Wimpey remains confident in its strong position and the long-term fundamentals of the sector.

Good value?

In recent years, homebuilders have looked relatively cheap in terms of retrospective earnings. That's because 2021 and 2022 were strong years for homebuilders amid a post-pandemic boom.

So how does Taylor Wimpey look in terms of future earnings? Below I list the expected earnings per share (EPS) for the next three years along with a price-to-earnings (P/E) ratio based on the current share price.

There's certainly an argument here that Taylor Wimpey doesn't seem too stingy. And that despite its dividend yield of 6.33%.

Long term, I hope the industry fully recovers, but I'm not sure if this is the right time to buy and if there is better value elsewhere. After all, I can find plenty of companies with lower earnings growth and P/Es.