We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Housing ETFs Likely to Spring Up in the Key Selling Season
Read MoreHide Full Article
The housing market, which has been very strong for about a year, is entering an even better spell. Winter months normally remain subdued for home building as the weather is too wet in the south and severely chilly in the north.
However, the housing market has now entered the key spring selling season, which is considered the peak time for home sellers. Normally, the season starts in March and lasts through May-June thanks to warmer weather after a chilly winter and buyers’ inclination to move to a new house before the next school calendar starts.
Per experts, about 40% of home sales take place between April and July in the United States. This year, buyers will try to dip their toes into the housing market for as long as the rates remain affordable.
Overall Demand for Homes Remains Strong
Demand in the space remained strong even amid the pandemic despite high home prices. Notably, record-low mortgage rates amid a super dovish Fed drove demand. Per the latest data, existing home sales jumped 6.7% in January 2021 to a seasonally adjusted annual rate of 6.5 million units, beating forecasts of 6.1 million, per tradingeconomics. Prospective buyers would definitely try to lock-in properties at still-low rates before a faster hike in rates (by the Fed) in 2022.
Jump in Rents Slightly Lower Than Jump in Home Prices
The year-over-year change in typical rent in January 2022 was 15.9% while change in typical home value from last year is 19.9%, per Zillow Research. With an increase in rent moderately lower than an increase in already-high home prices, people would definitely want to go for ownership.
Russia-Ukraine War to Lower Mortgage Rates
A jump in demand for the safe-haven U.S Treasuries weighed on U.S Treasury yields and mortgage rates in recent weeks as investors reacted to Russia’s invasion of Ukraine. Rates are still lower than November 2018’s last peak of 4.94%. If oil prices remain higher in the coming days and global growth slows down, we may see safe-haven trades in a strong position. This may keep bond yields and mortgage rates at check.
Home Buying: Millennials’ Preference
Though the percentage of millennials staying with their parents has risen over the years, many millennials are now reaching prime home-buying age — 30 to 35 years old — and that could drive sales for homebuilding companies.
John Lovallo, home builder analyst for Bank of America Merrill Lynch, noted that “in 2025 there are going to be 3 million more millennials than baby boomers at their peak in 1987,” which could propel the home-buying industry.
Per research by Global X, millennials now earn about $2 trillion, with income projected to grow to $8 trillion by 2025. Not only this, millennials are likely to inherit as much as $68 trillion from their parents, per a CNBC article (read: Millennials to Inherit as Much as $68TN? ETFs to Gain).
ETFs in Focus
Against this backdrop, we expect homebuilding ETFs like iShares U.S. Home Construction ETF (ITB - Free Report) , SPDR S&P Homebuilders ETF (XHB - Free Report) and Hoya Capital Housing ETF (HOMZ - Free Report) to gain ahead. All three ETFs have a Zacks Rank #2 (Buy).
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Housing ETFs Likely to Spring Up in the Key Selling Season
The housing market, which has been very strong for about a year, is entering an even better spell. Winter months normally remain subdued for home building as the weather is too wet in the south and severely chilly in the north.
However, the housing market has now entered the key spring selling season, which is considered the peak time for home sellers. Normally, the season starts in March and lasts through May-June thanks to warmer weather after a chilly winter and buyers’ inclination to move to a new house before the next school calendar starts.
Per experts, about 40% of home sales take place between April and July in the United States. This year, buyers will try to dip their toes into the housing market for as long as the rates remain affordable.
Overall Demand for Homes Remains Strong
Demand in the space remained strong even amid the pandemic despite high home prices. Notably, record-low mortgage rates amid a super dovish Fed drove demand. Per the latest data, existing home sales jumped 6.7% in January 2021 to a seasonally adjusted annual rate of 6.5 million units, beating forecasts of 6.1 million, per tradingeconomics. Prospective buyers would definitely try to lock-in properties at still-low rates before a faster hike in rates (by the Fed) in 2022.
Jump in Rents Slightly Lower Than Jump in Home Prices
The year-over-year change in typical rent in January 2022 was 15.9% while change in typical home value from last year is 19.9%, per Zillow Research. With an increase in rent moderately lower than an increase in already-high home prices, people would definitely want to go for ownership.
Russia-Ukraine War to Lower Mortgage Rates
A jump in demand for the safe-haven U.S Treasuries weighed on U.S Treasury yields and mortgage rates in recent weeks as investors reacted to Russia’s invasion of Ukraine. Rates are still lower than November 2018’s last peak of 4.94%. If oil prices remain higher in the coming days and global growth slows down, we may see safe-haven trades in a strong position. This may keep bond yields and mortgage rates at check.
Home Buying: Millennials’ Preference
Though the percentage of millennials staying with their parents has risen over the years, many millennials are now reaching prime home-buying age — 30 to 35 years old — and that could drive sales for homebuilding companies.
John Lovallo, home builder analyst for Bank of America Merrill Lynch, noted that “in 2025 there are going to be 3 million more millennials than baby boomers at their peak in 1987,” which could propel the home-buying industry.
Per research by Global X, millennials now earn about $2 trillion, with income projected to grow to $8 trillion by 2025. Not only this, millennials are likely to inherit as much as $68 trillion from their parents, per a CNBC article (read: Millennials to Inherit as Much as $68TN? ETFs to Gain).
ETFs in Focus
Against this backdrop, we expect homebuilding ETFs like iShares U.S. Home Construction ETF (ITB - Free Report) , SPDR S&P Homebuilders ETF (XHB - Free Report) and Hoya Capital Housing ETF (HOMZ - Free Report) to gain ahead. All three ETFs have a Zacks Rank #2 (Buy).