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U.S. homebuilders are now feeling more confident than they have since last summer. This is especially true as the National Association of Home Builders/Wells Fargo Housing Market Index gained for the fourth straight month, rising 3 points in March 2024 to 51. This marks the highest level since July.
Investors seeking to bet on the improving homebuilder trends could consider homebuilder ETFs — iShares U.S. Home Construction ETF (ITB - Free Report) , SPDR S&P Homebuilders ETF (XHB - Free Report) , Invesco Building & Construction ETF (PKB - Free Report) and Hoya Capital Housing ETF (HOMZ - Free Report) — which could be more compelling picks than a single stock. These products erase company-specific risks and provide a higher level of diversification while reducing volatility (see: all the Industrials ETFs here).
A measure of expected sales in the next six months rose to 62, the highest since June. Gauges of prospective buyer traffic and current sales advanced to seven-month highs, per the NAHB data.
The optimism can be attributed to lower mortgage rates and an improved pricing environment amid a continued existing home inventory shortage. Rates on the popular 30-year fixed mortgage are currently hovering 6.74%, according to Freddie Mac, down from a high of 7.79% at the end of October 2023 but well above the pre-pandemic average of 3.9%. The recent decline has prompted a burst of optimism among homebuilders that the worst may be over.
With the Fed expected to initiate interest rate cuts in the second half of 2024, lower financing costs will draw more prospective buyers into the market. The homebuilding sector, known for its sensitivity to interest rate changes, is thus poised for greater gains (read: Housing ETFs to Spring Up in the Key Selling Season?).
The elevation in builders' sentiment is poised to spur an uptick in single-family home starts over the course of 2024. More than half of home builders are currently offering some incentive to boost sales. These incentives, coupled with a dwindling supply of existing homes on the market and a projected rise in single-family housing starts, are expected to bolster new home sales in the forthcoming months.
Both housing starts and building permits rebounded in February, according to the latest data. Housing starts rose 10.3% to a seasonally adjusted annualized rate of 1,521,000, whereas building permits grew 1.9% to an annualized rate of 1,518,000, the highest level since August. The data also revealed that permits for the future construction of single-family housing units rose to more than a one-and-half year high last month.
However, as home-building activity picks up, builders are expected to grapple with rising material prices, particularly for lumber, and the shortage of labor.
iShares U.S. Home Construction ETF provides exposure to the U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index.
With an AUM of $3.1 billion, iShares U.S. Home Construction ETF holds a basket of 47 stocks, with a heavy concentration on the top two firms. The product charges 40 bps in annual fees and trades in a heavy volume of around 2 million shares a day, on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #3 (Hold), with a High risk outlook.
SPDR S&P Homebuilders ETF provides exposure to homebuilders with a well-diversified exposure across building products, home furnishing, home improvement retail, home furnishing retail and household appliances. It tracks the S&P Homebuilders Select Industry Index, holding 35 stocks in its basket.
SPDR S&P Homebuilders ETF is the most popular option in the homebuilding space, with an AUM of $1.9 billion and an average daily volume of 3 million shares. The product charges 35 bps in annual fees and has a Zacks ETF Rank #3, with a High risk outlook (read: Homebuilder ETF Hits New 52-Week High).
Invesco Building & Construction ETF follows the Dynamic Building & Construction Intellidex Index, holding 32 well-diversified stocks in its basket, with none accounting for more than 5.2% of the assets.
Invesco Building & Construction ETF has amassed assets worth $280.7 million and sees a lower volume of roughly 34,000 shares per day, on average. The expense ratio comes in at 0.62%. Invesco Dynamic Building & Construction ETF has a Zacks ETF Rank #3, with a High risk outlook.
Hoya Capital Housing ETF offers a diversified exposure across the entire U.S. residential housing industry, seeking to invest in many of the fastest-growing real estate companies by tracking the Hoya Capital Housing 100 Index. It holds 100 socks in its basket, with each making up for less than 3.2% of assets.
Hoya Capital Housing ETF has accumulated $40.2 million in its asset base and charges 30 bps in annual fees. The product trades in an average daily volume of 2,000 shares.
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Homebuilder Returns to Growth: ETFs to Tap
U.S. homebuilders are now feeling more confident than they have since last summer. This is especially true as the National Association of Home Builders/Wells Fargo Housing Market Index gained for the fourth straight month, rising 3 points in March 2024 to 51. This marks the highest level since July.
Investors seeking to bet on the improving homebuilder trends could consider homebuilder ETFs — iShares U.S. Home Construction ETF (ITB - Free Report) , SPDR S&P Homebuilders ETF (XHB - Free Report) , Invesco Building & Construction ETF (PKB - Free Report) and Hoya Capital Housing ETF (HOMZ - Free Report) — which could be more compelling picks than a single stock. These products erase company-specific risks and provide a higher level of diversification while reducing volatility (see: all the Industrials ETFs here).
A measure of expected sales in the next six months rose to 62, the highest since June. Gauges of prospective buyer traffic and current sales advanced to seven-month highs, per the NAHB data.
The optimism can be attributed to lower mortgage rates and an improved pricing environment amid a continued existing home inventory shortage. Rates on the popular 30-year fixed mortgage are currently hovering 6.74%, according to Freddie Mac, down from a high of 7.79% at the end of October 2023 but well above the pre-pandemic average of 3.9%. The recent decline has prompted a burst of optimism among homebuilders that the worst may be over.
With the Fed expected to initiate interest rate cuts in the second half of 2024, lower financing costs will draw more prospective buyers into the market. The homebuilding sector, known for its sensitivity to interest rate changes, is thus poised for greater gains (read: Housing ETFs to Spring Up in the Key Selling Season?).
The elevation in builders' sentiment is poised to spur an uptick in single-family home starts over the course of 2024. More than half of home builders are currently offering some incentive to boost sales. These incentives, coupled with a dwindling supply of existing homes on the market and a projected rise in single-family housing starts, are expected to bolster new home sales in the forthcoming months.
Both housing starts and building permits rebounded in February, according to the latest data. Housing starts rose 10.3% to a seasonally adjusted annualized rate of 1,521,000, whereas building permits grew 1.9% to an annualized rate of 1,518,000, the highest level since August. The data also revealed that permits for the future construction of single-family housing units rose to more than a one-and-half year high last month.
However, as home-building activity picks up, builders are expected to grapple with rising material prices, particularly for lumber, and the shortage of labor.
iShares U.S. Home Construction ETF (ITB - Free Report)
iShares U.S. Home Construction ETF provides exposure to the U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index.
With an AUM of $3.1 billion, iShares U.S. Home Construction ETF holds a basket of 47 stocks, with a heavy concentration on the top two firms. The product charges 40 bps in annual fees and trades in a heavy volume of around 2 million shares a day, on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #3 (Hold), with a High risk outlook.
SPDR S&P Homebuilders ETF (XHB - Free Report)
SPDR S&P Homebuilders ETF provides exposure to homebuilders with a well-diversified exposure across building products, home furnishing, home improvement retail, home furnishing retail and household appliances. It tracks the S&P Homebuilders Select Industry Index, holding 35 stocks in its basket.
SPDR S&P Homebuilders ETF is the most popular option in the homebuilding space, with an AUM of $1.9 billion and an average daily volume of 3 million shares. The product charges 35 bps in annual fees and has a Zacks ETF Rank #3, with a High risk outlook (read: Homebuilder ETF Hits New 52-Week High).
Invesco Building & Construction ETF (PKB - Free Report)
Invesco Building & Construction ETF follows the Dynamic Building & Construction Intellidex Index, holding 32 well-diversified stocks in its basket, with none accounting for more than 5.2% of the assets.
Invesco Building & Construction ETF has amassed assets worth $280.7 million and sees a lower volume of roughly 34,000 shares per day, on average. The expense ratio comes in at 0.62%. Invesco Dynamic Building & Construction ETF has a Zacks ETF Rank #3, with a High risk outlook.
Hoya Capital Housing ETF (HOMZ - Free Report)
Hoya Capital Housing ETF offers a diversified exposure across the entire U.S. residential housing industry, seeking to invest in many of the fastest-growing real estate companies by tracking the Hoya Capital Housing 100 Index. It holds 100 socks in its basket, with each making up for less than 3.2% of assets.
Hoya Capital Housing ETF has accumulated $40.2 million in its asset base and charges 30 bps in annual fees. The product trades in an average daily volume of 2,000 shares.