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What Awaits Housing ETFs on Upbeat US Existing Home Sales Data?
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The latest existing home sales data looks encouraging. Per the National Association of Realtors (NAR) report, there was a 1.4% month-over-month increase in existing homes sales to a seasonally-adjusted annual rate of 5.86 million units in June. Moreover, existing home sales rose 22.9% year over year.
First-time buyers accounted for 31% of sales in June, on par with May but comparing unfavorably with 35% in the year-ago period. Existing homes sales increased in the Midwest by 3.1% month over month in June. Meanwhile, sales in the Northeast and West increased a respective 2.8% and 1.7% from June’s figure. Existing-home sales were flat in the Southern region.
Commenting on the housing market scenario, Lawrence Yun, NAR’s chief economist, reportedly said, "Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales. Home sales continue to run at a pace above the rate seen before the pandemic."
Moreover, the median existing-home price for all housing types was $363,300, up 23.4% year over year in June, marking the 112th consecutive month of year-over-year gain since March 2012.
Present U.S. Housing Market Scenario
The U.S. housing sector has pleased investors with impressive performance amid the tough pandemic times. In fact, residential construction investment rose double digits since the third quarter of 2020, per a Reuters article. Moreover, market experts expect the housing sector to contribute modestly to gross domestic product growth in the second quarter.
However, it seems the space is now facing the brunt of rising lumber prices. According to NAHB’s latest estimates, changes in prices for softwood lumber products that occurred between Apr 17, 2020 and Jul 8, 2021 have added $29,833 to an average new single-family home price. It also added $9,990 to the market value of an average new multifamily home.
Rising softwood lumber, material and labor costs continue to be a major hurdle for homebuilders. The supply chain disturbances caused by the lockdown to contain the coronavirus outbreak have also led to a rise in concrete, metal products, appliances and other expenses, as mentioned in a FOX Business article.
Moreover, there was a sharp rise in prices of plywood. Going on, scarcity in supplies of copper along with tariffs on steel imports is also bumping up building costs. Moreover, scarce supplies of semiconductors globally have resulted in shrinking supplies of some appliances, per a Reuters article.
These factors are affecting affordability as prices of existing and new homes are soaring. Notably, house prices soared the most in more than 15 years annually, increasing worries that some first-time buyers might be priced out of the market, as stated in a Reuters article. Also, low employment levels might impede momentum of the U.S. housing market.
Notably, consumers seem to be disturbed about the rising prices of homes, vehicles and household durables. In fact, the buying attitudes for vehicles and homes contracted to their lowest level since 1982, per a Bloomberg report.
Meanwhile, the housing market has steadily benefited from changing demographical preferences of a large chunk of population as people increasingly looked for work-from-home-friendly properties. Notably, individuals were shifting from city centers to suburbs and other low-density areas looking for spacious accommodations for home offices and schools, per the sources.
Housing ETFs That Might Gain
Against such a backdrop, here are a few housing ETFs that might gain on improving housing sector scenario:
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 $2.25 billion, it holds a basket of 46 stocks, heavily focused on the top two firms. The product charges 42 basis points (bps) in annual fees (read: Consumer Price Sees Biggest Jump in 13 Years: ETFs to Gain).
A popular choice in the homebuilding space, XHB, follows the S&P Homebuilders Select Industry Index. The fund holds about 35 securities in its basket. It has AUM of $1.75 billion. The fund charges 35 bps in annual fees (read: 5 Winning ETF Strategies for the Second Half).
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding a basket of well-diversified 30 stocks, each accounting for less than a 5.80% share. It has amassed assets worth $283.4 million. The expense ratio is 0.59% (read: Looking for Earnings Surprise? 6 Sector ETFs to Play).
The fund seeks to provide investment results that before fees and expenses, correspond generally to the total return performance of the Hoya Capital Housing 100 Index, a rules-based Index designed to track the 100 companies that collectively represents the performance of the U.S. housing Industry. It has AUM of $75.1 million. The fund charges 30 bps in annual fees (see all the Materials ETFs here).
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What Awaits Housing ETFs on Upbeat US Existing Home Sales Data?
The latest existing home sales data looks encouraging. Per the National Association of Realtors (NAR) report, there was a 1.4% month-over-month increase in existing homes sales to a seasonally-adjusted annual rate of 5.86 million units in June. Moreover, existing home sales rose 22.9% year over year.
First-time buyers accounted for 31% of sales in June, on par with May but comparing unfavorably with 35% in the year-ago period. Existing homes sales increased in the Midwest by 3.1% month over month in June. Meanwhile, sales in the Northeast and West increased a respective 2.8% and 1.7% from June’s figure. Existing-home sales were flat in the Southern region.
Commenting on the housing market scenario, Lawrence Yun, NAR’s chief economist, reportedly said, "Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales. Home sales continue to run at a pace above the rate seen before the pandemic."
Moreover, the median existing-home price for all housing types was $363,300, up 23.4% year over year in June, marking the 112th consecutive month of year-over-year gain since March 2012.
Present U.S. Housing Market Scenario
The U.S. housing sector has pleased investors with impressive performance amid the tough pandemic times. In fact, residential construction investment rose double digits since the third quarter of 2020, per a Reuters article. Moreover, market experts expect the housing sector to contribute modestly to gross domestic product growth in the second quarter.
However, it seems the space is now facing the brunt of rising lumber prices. According to NAHB’s latest estimates, changes in prices for softwood lumber products that occurred between Apr 17, 2020 and Jul 8, 2021 have added $29,833 to an average new single-family home price. It also added $9,990 to the market value of an average new multifamily home.
Rising softwood lumber, material and labor costs continue to be a major hurdle for homebuilders. The supply chain disturbances caused by the lockdown to contain the coronavirus outbreak have also led to a rise in concrete, metal products, appliances and other expenses, as mentioned in a FOX Business article.
Moreover, there was a sharp rise in prices of plywood. Going on, scarcity in supplies of copper along with tariffs on steel imports is also bumping up building costs. Moreover, scarce supplies of semiconductors globally have resulted in shrinking supplies of some appliances, per a Reuters article.
These factors are affecting affordability as prices of existing and new homes are soaring. Notably, house prices soared the most in more than 15 years annually, increasing worries that some first-time buyers might be priced out of the market, as stated in a Reuters article. Also, low employment levels might impede momentum of the U.S. housing market.
Notably, consumers seem to be disturbed about the rising prices of homes, vehicles and household durables. In fact, the buying attitudes for vehicles and homes contracted to their lowest level since 1982, per a Bloomberg report.
Meanwhile, the housing market has steadily benefited from changing demographical preferences of a large chunk of population as people increasingly looked for work-from-home-friendly properties. Notably, individuals were shifting from city centers to suburbs and other low-density areas looking for spacious accommodations for home offices and schools, per the sources.
Housing ETFs That Might Gain
Against such a backdrop, here are a few housing ETFs that might gain on improving housing sector scenario:
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 $2.25 billion, it holds a basket of 46 stocks, heavily focused on the top two firms. The product charges 42 basis points (bps) in annual fees (read: Consumer Price Sees Biggest Jump in 13 Years: ETFs to Gain).
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 35 securities in its basket. It has AUM of $1.75 billion. The fund charges 35 bps in annual fees (read: 5 Winning ETF Strategies for the Second Half).
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding a basket of well-diversified 30 stocks, each accounting for less than a 5.80% share. It has amassed assets worth $283.4 million. The expense ratio is 0.59% (read: Looking for Earnings Surprise? 6 Sector ETFs to Play).
Hoya Capital Housing ETF (HOMZ - Free Report)
The fund seeks to provide investment results that before fees and expenses, correspond generally to the total return performance of the Hoya Capital Housing 100 Index, a rules-based Index designed to track the 100 companies that collectively represents the performance of the U.S. housing Industry. It has AUM of $75.1 million. The fund charges 30 bps in annual fees (see all the Materials ETFs here).