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ETFs in Trouble as Homebuilder Confidence Falls Steeply in April
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The latest data on the U.S. housing market seems disappointing as the coronavirus pandemic hammers the economy. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for single-family homes dropped 42 points to 30 in April (the lowest point since June 2012) compared with 72 in March, 74 in February and 75 in January (per the NAHB press release). A negative reading (below 50) was last noted in June 2014.
Notably, all three components of the index dropped. The current sales conditions came in at 36 after falling 43 points, the buyer traffic was down 43 points to 13, with sales expectations sliding 39 points to 36 (per the NAHB press release). The monthly averages regional HMI scores in the Northeast declined 45 points to 19. Moreover, the South index had dropped 42 points to 34. Moreover, the Western index was down 47 points to 32, with the Midwest falling 42 points to 25 (per the NAHB press release).
Coronavirus Taking a Toll on the Housing Market
The coronavirus pandemic has reached a grim mark, infecting more than 2.06 million worldwide. The death toll has risen to at least 137,000 globally, according to Johns Hopkins University. The number of confirmed cases in the United States has soared to at least 638,000, with more than 30,000 deaths. In this health crisis, global economies are under tremendous stress due to the shutdown of economic activities and social-distancing measures.
The job market is also expected to be disrupted as Americans are increasingly filing claims for unemployment benefits. With rising unemployment levels, the spending capacity of consumers will, undoubtedly, be compromised to a great extent. In fact, the latest preliminary report on April’s U.S. consumer sentiment shows that the metric has seen a record decline. As a result, the housing sector is being impacted, as coronavirus hits the job market and spending. In its 35-year history, the index measuring the homebuilder sentiment has witnessed the sharpest monthly decline (per a CNBC article). The metric also compares unfavorably with economists’ expectations of a drop to 55 (according to a CNBC article).
Dean Mon, NAHB Chairman, has summed up the current housing market conditions rightly. In this regard, he said, “This unprecedented drop in builder confidence is due exclusively to the coronavirus outbreak across the nation, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities” (per the NAHB press release).
This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With an AUM of $722.5 million, 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 #2 (Buy), with a High-risk outlook (read: Any Bright Spot in Q1 Earnings? Sector ETFs & Stocks to Buy).
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 an AUM of $457.7 million. The fund charges 35 bps in annual fees and carries a Zacks ETF Rank of 2, with a High-risk outlook.
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding well-diversified 29 stocks in its basket, each accounting for less than a 6.94% share. It has amassed assets worth $61 million. The expense ratio is 0.60%. It is a Zacks #2 Ranked ETF, with a High-risk outlook (see: all the Materials ETFs here).
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ETFs in Trouble as Homebuilder Confidence Falls Steeply in April
The latest data on the U.S. housing market seems disappointing as the coronavirus pandemic hammers the economy. Per the monthly National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for single-family homes dropped 42 points to 30 in April (the lowest point since June 2012) compared with 72 in March, 74 in February and 75 in January (per the NAHB press release). A negative reading (below 50) was last noted in June 2014.
Notably, all three components of the index dropped. The current sales conditions came in at 36 after falling 43 points, the buyer traffic was down 43 points to 13, with sales expectations sliding 39 points to 36 (per the NAHB press release). The monthly averages regional HMI scores in the Northeast declined 45 points to 19. Moreover, the South index had dropped 42 points to 34. Moreover, the Western index was down 47 points to 32, with the Midwest falling 42 points to 25 (per the NAHB press release).
Coronavirus Taking a Toll on the Housing Market
The coronavirus pandemic has reached a grim mark, infecting more than 2.06 million worldwide. The death toll has risen to at least 137,000 globally, according to Johns Hopkins University. The number of confirmed cases in the United States has soared to at least 638,000, with more than 30,000 deaths. In this health crisis, global economies are under tremendous stress due to the shutdown of economic activities and social-distancing measures.
The job market is also expected to be disrupted as Americans are increasingly filing claims for unemployment benefits. With rising unemployment levels, the spending capacity of consumers will, undoubtedly, be compromised to a great extent. In fact, the latest preliminary report on April’s U.S. consumer sentiment shows that the metric has seen a record decline. As a result, the housing sector is being impacted, as coronavirus hits the job market and spending. In its 35-year history, the index measuring the homebuilder sentiment has witnessed the sharpest monthly decline (per a CNBC article). The metric also compares unfavorably with economists’ expectations of a drop to 55 (according to a CNBC article).
Dean Mon, NAHB Chairman, has summed up the current housing market conditions rightly. In this regard, he said, “This unprecedented drop in builder confidence is due exclusively to the coronavirus outbreak across the nation, as unemployment has skyrocketed and gaps in the supply chain have hampered construction activities” (per the NAHB press release).
Homebuilder ETFs That May Face Trouble
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 an AUM of $722.5 million, 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 #2 (Buy), with a High-risk outlook (read: Any Bright Spot in Q1 Earnings? Sector ETFs & Stocks to Buy).
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 an AUM of $457.7 million. The fund charges 35 bps in annual fees and carries a Zacks ETF Rank of 2, with a High-risk outlook.
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding well-diversified 29 stocks in its basket, each accounting for less than a 6.94% share. It has amassed assets worth $61 million. The expense ratio is 0.60%. It is a Zacks #2 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 >>