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ETFs to Watch With New Homes Sales on the Rise

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After being under pressure for a long time, the U.S. housing market downtrend saw a turnaround on rising demand. Per CNN, sales for new homes rose in February as mortgage rates decreased from the highs of last year.

Home Sales on the Rise

The housing markets have managed to withstand the effects of a hawkish Fed and are showing signs of stabilizing. New family homes sales were up 1.1% to a seasonally adjusted annual rate of 640,000 units in February. According to CNBC, with the median prices dropping for the first time in a decade, sales of previously owned homes were up by 14.5% in February, marking the first monthly gain in 12 months.

However, the collapse of the regional banks led to a tightening of the credit policies. This could see the financial institutions being sterner in lending credit making it more difficult for prospective home buyers to borrow.

How is the Mortgage Rate Shaping up?

According to a Reuters article, the mortgage rate on the 30-year fixed-rate mortgage fell by 23 bps to 6.48% on the backdrop of the fall in yield of the treasury notes. The collapse of SVB and the regional banking crisis engulfing the country saw the mortgage interest rates lowering, proving to be a consolation for U.S. home buyers. The crisis also drove up the loan applications volume.

ETFs in Focus

Falling inflation levels in the United States may prove beneficial to the housing market. Homebuilder ETF will get a dual advantage from falling inflation and a higher shelter cost. Falling inflation will keep the mortgage rates low, making home ownership less expensive for first-time buyers, while higher shelter costs will provide homebuilders an edge to negotiate well.

iShares U.S. Home Construction ETF (ITB - Free Report)

The iShares U.S. Home Construction ETF seeks investment results that generally correspond to the price and yield performance of the Dow Jones U.S. Select Home Construction Index. The fund has 48 securities in its asset basket, with the largest exposure in homebuilding (66.56%).

The fund charges an annual fee of 39 bps and has a 30-day average daily volume of about 3.43 million shares. iShares U.S. Home Construction ETF has amassed $1.47 billion in its asset base. The fund has gained 11.62% in the past three months.

SPDR S&P Homebuilders ETF (XHB - Free Report)

The SPDR S&P Homebuilders ETF, before expenses, seeks to closely match the returns and characteristics of the S&P Homebuilders Select Industry Index. The fund holds a basket of 35 securities, with building products and homebuilding taking the largest shares at 45.34% and 31.51%, respectively.

SPDR S&P Homebuilders ETF has gathered $1.05 billion in its asset base and charges an annual fee of 35 bps. It has a dividend yield of 1.02% with an average daily volume of around 3.26 million shares. The fund has added 7.46% in the past three months.

Hoya Capital Housing ETF (HOMZ - Free Report)

The Hoya Capital Housing ETF seeks to track the performance, before fees and expenses, of the Hoya Capital Housing 100 Index, which is designed to track total spending on housing and housing-related services across the United States. The fund holds a basket of 103 securities with a tilt toward real estate with a 36.99% share.

The fund has amassed $31.68 million in its asset base. It charges an annual fee of 30 bps and has a traded average daily volume of about 3,600 shares. Hoya Capital Housing ETF has a dividend yield of 2.34% and has gained 3.43% in the past three months.

Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL - Free Report)

The Direxion Daily Homebuilders & Supplies Bull 3X Shares seeks daily investment results, before fees and expenses, of 300% of the performance of the Dow Jones U.S. Select Home Construction Index. The fund has the largest exposure in homebuilding and building products, with 65.89% and 13.34%, respectively. D.R. Horton and Lennar Corporation are the top two firms with, respectively, 16.45% and 13.6% of the asset base each

The fund has amassed $154.69 million in its asset base. It charges an annual fee of 98 bps and has a traded average daily volume of around 293,000 shares. The fund is up 29.73% in the past three months. 

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