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Housing ETFs to Spring Up in the Key Selling Season?
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The housing market, which has been performing decently, is entering a 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. No wonder, SPDR S&P Homebuilders ETF (XHB - Free Report) is now at the all-time high level.
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 depending on the rate scenario. Higher mortgage rates have weighed on the home sales in the past one year. However, the scenario has been changing now.
Improving Homebuilders’ Confidence
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) experienced a notable increase, climbing 4 points to reach 48 in February, as quoted on Yahoo Finance. This improvement marks the third successive month of positive sentiment in the housing market and represents the highest level of confidence since August 2023. The uptick, surpassing economists' expectations of a 46 reading, signals growing optimism among homebuilders.
Factors Boosting Confidence
Several factors contribute to the improved confidence among homebuilders. Considerable decline in mortgage rates in recent months (amid hopes of Fed rate cuts) has played a crucial role in boosting expectations for stronger demand from homebuyers. The relative strength of the newly constructed home market, coupled with the anticipation of further decreases in mortgage rates, is expected to stimulate buyer interest.
NAHB Chairman Alicia Huey, commenting on the trend, highlighted the improved buyer traffic and the positive impact of even minor rate declines on prospective homebuyers' interest. Despite the ongoing challenge of still-high mortgage rates, there is an expectation of increased market activity driven by pent-up demand, especially if rates continue to fall throughout the year.
The industry has observed a shift in strategies regarding pricing and incentives to stimulate sales. In February, the percentage of builders who reported reducing home prices fell to 25% from 31% in January and 36% in the last two months of 2023. Concurrently, the prevalence of builders offering incentives to buyers decreased to 58%, marking the lowest share since the previous August.
ETFs in Focus
Against this backdrop, below we highlight a few housing stocks and ETFs that could be up for gains in the coming days. Both stocks hail from well-placed industry and sector. Zacks Industry Rank falls within the top 10% and the Zacks Sector Rank falls within the top 6%.
The Zacks Rank #1 (Strong Buy) NVR, Inc. is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis.
The Zacks Rank #1 Toll Brothers builds single-family detached and attached home communities; master planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves.
The underlying Dow Jones U.S. Select Home Builders Index is a subset of the Dow Jones U.S. Household Goods Index. It is a free-float adjusted market capitalization-weighted index. It measures the performance of the home construction sector of the U.S. equity market. The fund charges 40 bps in fees.
The underlying S&P Homebuilders Select Industry Index represents the homebuilding sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Homebuilder’s Index is a modified equal weight index. The fund charges 35 bps in fees.
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Housing ETFs to Spring Up in the Key Selling Season?
The housing market, which has been performing decently, is entering a 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. No wonder, SPDR S&P Homebuilders ETF (XHB - Free Report) is now at the all-time high level.
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 depending on the rate scenario. Higher mortgage rates have weighed on the home sales in the past one year. However, the scenario has been changing now.
Improving Homebuilders’ Confidence
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) experienced a notable increase, climbing 4 points to reach 48 in February, as quoted on Yahoo Finance. This improvement marks the third successive month of positive sentiment in the housing market and represents the highest level of confidence since August 2023. The uptick, surpassing economists' expectations of a 46 reading, signals growing optimism among homebuilders.
Factors Boosting Confidence
Several factors contribute to the improved confidence among homebuilders. Considerable decline in mortgage rates in recent months (amid hopes of Fed rate cuts) has played a crucial role in boosting expectations for stronger demand from homebuyers. The relative strength of the newly constructed home market, coupled with the anticipation of further decreases in mortgage rates, is expected to stimulate buyer interest.
NAHB Chairman Alicia Huey, commenting on the trend, highlighted the improved buyer traffic and the positive impact of even minor rate declines on prospective homebuyers' interest. Despite the ongoing challenge of still-high mortgage rates, there is an expectation of increased market activity driven by pent-up demand, especially if rates continue to fall throughout the year.
The industry has observed a shift in strategies regarding pricing and incentives to stimulate sales. In February, the percentage of builders who reported reducing home prices fell to 25% from 31% in January and 36% in the last two months of 2023. Concurrently, the prevalence of builders offering incentives to buyers decreased to 58%, marking the lowest share since the previous August.
ETFs in Focus
Against this backdrop, below we highlight a few housing stocks and ETFs that could be up for gains in the coming days. Both stocks hail from well-placed industry and sector. Zacks Industry Rank falls within the top 10% and the Zacks Sector Rank falls within the top 6%.
Stocks in Focus
NVR (NVR - Free Report)
The Zacks Rank #1 (Strong Buy) NVR, Inc. is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis.
Toll Brothers (TOL - Free Report)
The Zacks Rank #1 Toll Brothers builds single-family detached and attached home communities; master planned luxury residential resort-style golf communities; and urban low, mid, and high-rise communities, principally on the land it develops and improves.
ETFs in Focus
iShares U.S. Home Construction ETF (ITB - Free Report)
The underlying Dow Jones U.S. Select Home Builders Index is a subset of the Dow Jones U.S. Household Goods Index. It is a free-float adjusted market capitalization-weighted index. It measures the performance of the home construction sector of the U.S. equity market. The fund charges 40 bps in fees.
SPDR S&P Homebuilders ETF (XHB - Free Report)
The underlying S&P Homebuilders Select Industry Index represents the homebuilding sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Homebuilder’s Index is a modified equal weight index. The fund charges 35 bps in fees.