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ETFs to Gain as Homebuilder Confidence Improves in June
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The latest data on the U.S. housing market seems encouraging even as the number of coronavirus cases continues to rise in the United States. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for single-family homes surged to 58 points in June from 37 in May and 30 in April (the lowest since June 2012). The metric also surpassed analysts’ expectations of a reading of 46, per a Bloomberg article. Going on, June’s 21-point increase follows a seven-point rise in May and is the biggest on record for the index. Notably, any reading above 50 is considered positive and signals improving confidence.
Notably, all three components of the index gained. The current sales conditions came in at 63 compared with 42 in May, the buyer traffic surged to 43 from 21 last month and sales expectations rose to 68 in June from 46 in the prior month, per the NAHB press release. The monthly averages regional HMI scores in the Northeast spiked 31 points to 48. Moreover, the South index rose 20 points to 62. Moreover, the Western index jumped 22 points to 66, with the Midwest rising 19 points to 51, per the release.
Current Housing Market Scenario
Low interest rates are boosting demand in the housing market, resulting in an increase in mortgage applications. Per a MarketWatch article, a Realtor.com report reflects that price gains have bounced back to their pre-coronavirus pace which is also an indicator of improving housing market conditions. Meanwhile, scarcity of inventories continues and might lead to further price increases. However, low employment levels and fears of a second wave of coronavirus outbreak will continue to impede the momentum of the U.S. housing market.
In this regard, NAHB Chief Economist Robert Dietz said that, “builders report increasing demand for families seeking single-family homes in inner and outer suburbs that feature lower-density neighborhoods.At the same time, elevated unemployment and the risk of new, local virus outbreaks remain a risk to the housing market”, per a Bloomberg article.
This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $1.47 billion, it holds a basket of 44 stocks, heavily focused on the top three firms. The product charges 42 basis points (bps) in annual fees. It has a Zacks ETF Rank #3 (Hold), with a High-risk outlook (read: Sector ETFs & Stocks to Explode as Fed Remains Dovish).
A popular choice in the homebuilding space, XHB follows the S&P Homebuilders Select Industry Index. The fund holds about 34 securities in its basket. It has AUM of $797.2 million. The fund charges 35 bps in annual fees and carries a Zacks ETF Rank of 3, with a High-risk outlook (read: Housing ETFs Sizzle With Opportunities as Economy Reopens).
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding well-diversified 31 stocks in its basket, each accounting for less than a 5.28% share. It has amassed assets worth $79 million. The expense ratio is 0.60%. It is a Zacks #3 Ranked ETF, with a High-risk outlook (see: all the Materials ETFs here).
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ETFs to Gain as Homebuilder Confidence Improves in June
The latest data on the U.S. housing market seems encouraging even as the number of coronavirus cases continues to rise in the United States. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for single-family homes surged to 58 points in June from 37 in May and 30 in April (the lowest since June 2012). The metric also surpassed analysts’ expectations of a reading of 46, per a Bloomberg article. Going on, June’s 21-point increase follows a seven-point rise in May and is the biggest on record for the index. Notably, any reading above 50 is considered positive and signals improving confidence.
Notably, all three components of the index gained. The current sales conditions came in at 63 compared with 42 in May, the buyer traffic surged to 43 from 21 last month and sales expectations rose to 68 in June from 46 in the prior month, per the NAHB press release. The monthly averages regional HMI scores in the Northeast spiked 31 points to 48. Moreover, the South index rose 20 points to 62. Moreover, the Western index jumped 22 points to 66, with the Midwest rising 19 points to 51, per the release.
Current Housing Market Scenario
Low interest rates are boosting demand in the housing market, resulting in an increase in mortgage applications. Per a MarketWatch article, a Realtor.com report reflects that price gains have bounced back to their pre-coronavirus pace which is also an indicator of improving housing market conditions. Meanwhile, scarcity of inventories continues and might lead to further price increases. However, low employment levels and fears of a second wave of coronavirus outbreak will continue to impede the momentum of the U.S. housing market.
In this regard, NAHB Chief Economist Robert Dietz said that, “builders report increasing demand for families seeking single-family homes in inner and outer suburbs that feature lower-density neighborhoods.At the same time, elevated unemployment and the risk of new, local virus outbreaks remain a risk to the housing market”, per a Bloomberg article.
Homebuilder ETFs That May Gain
iShares U.S. Home Construction ETF (ITB - Free Report)
This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $1.47 billion, it holds a basket of 44 stocks, heavily focused on the top three firms. The product charges 42 basis points (bps) in annual fees. It has a Zacks ETF Rank #3 (Hold), with a High-risk outlook (read: Sector ETFs & Stocks to Explode as Fed Remains Dovish).
SPDR S&P Homebuilders ETF (XHB - Free Report)
A popular choice in the homebuilding space, XHB follows the S&P Homebuilders Select Industry Index. The fund holds about 34 securities in its basket. It has AUM of $797.2 million. The fund charges 35 bps in annual fees and carries a Zacks ETF Rank of 3, with a High-risk outlook (read: Housing ETFs Sizzle With Opportunities as Economy Reopens).
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding well-diversified 31 stocks in its basket, each accounting for less than a 5.28% share. It has amassed assets worth $79 million. The expense ratio is 0.60%. It is a Zacks #3 Ranked ETF, with a High-risk outlook (see: all the Materials ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>