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Housing ETFs to Gain on Upbeat US New Home Sales Data
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The latest new home sales data for May looks encouraging. Per the Commerce Department data, new home sales surged 16.6% to a seasonally adjusted annual rate of 676,000 units in the month. The metric also rose 12.7% year over year and beat the consensus forecast by 7.3%. Meanwhile, April’s sales pace was revised downward to 580,000 units from the previously-reported 623,000 units.
New home sales, which make for around 10% of total U.S. home sales, posted sequential gains in May in three out of four U.S. regions, largely led by a 45.5% rise in the Northeast. This was followed by gains of 29% in the West and 15.2% in the South. The Midwest region, however, slid 6.4%. The inventory of new homes for sale at the end of May was 318,000, reflecting a 5.6-month supply. Meanwhile, the median price for a new home sold last month was $317,900, down 1.7% year over year.
Is Housing Market Recovering From Coronavirus Slowdown?
The momentum in the U.S. housing market seems to be returning and some encouraging data sets are emerging from the sector. The May data on U.S. housing starts and building permits reflect improvement in U.S. homebuilding. According to the Commerce Department, housing starts jumped 4.3% to a seasonally adjusted annual rate of 974,000 units in May per a National Association of Home Builders (NAHB) press release. The metric compares favorably with the fall of 26.4% in April and 19% in March. Building permits, a construction pointer for the coming months, climbed 14.4% to a rate of 1.220 million units in May. The latest data on the U.S. homebuilder confidence seems encouraging even as the number of coronavirus cases continues to spike in the United States.
Notably, new home sales are generally considered a dependable metric for housing market health as it is calculated at the signing of a contract. Upbeat on the new home sales data, Yelena Maleyev, associate economist at Grant Thornton, has said, "the housing market has held on relatively well during this service sector recession as would-be buyers have taken advantage of incredibly low mortgage rates, despite only viewing the homes online in many cases", per a Bloomberg article.
Low interest rates are boosting demand in the housing market, resultantly, an increase in mortgage applications is being observed. Going by a Reuters article, data suggests that applications for loans to purchase a home rose to a near 11-1/2-year high in the week ending Jun 12. Mortgage applications are also believed to have risen above the pre-pandemic levels (per a CNBC report).
Per a MarketWatch article, a Realtor.com report reflects that price gains have rebounded to their pre-coronavirus levels, which is also an indicator of improving housing market conditions. Meanwhile, scarcity of inventories persists, which might lead to further price increases. However, low employment levels and fears of a second wave of coronavirus outbreak will continue to dampen the momentum of the housing market in the United States.
Housing ETFs That Might Gain
In such a scenario, here are a few housing ETFs that investors can keep an eye on:
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 $1.45 billion, 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 carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (read: Sector ETFs & Stocks to Explode as Fed Remains Dovish).
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 an AUM of $784.1 million. The fund charges 35 bps in annual fees and carries a Zacks ETF Rank of 3, with a High-risk outlook (read: Housing ETFs Sizzle With Opportunities as Economy Reopens).
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding well-diversified 31 stocks in its basket, each accounting for less than a 5.25% share. It has amassed assets worth $77.7 million. The expense ratio is 0.60%. It is a Zacks #3 Ranked ETF, with a High-risk outlook (see: all the Materials ETFs here).
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Housing ETFs to Gain on Upbeat US New Home Sales Data
The latest new home sales data for May looks encouraging. Per the Commerce Department data, new home sales surged 16.6% to a seasonally adjusted annual rate of 676,000 units in the month. The metric also rose 12.7% year over year and beat the consensus forecast by 7.3%. Meanwhile, April’s sales pace was revised downward to 580,000 units from the previously-reported 623,000 units.
New home sales, which make for around 10% of total U.S. home sales, posted sequential gains in May in three out of four U.S. regions, largely led by a 45.5% rise in the Northeast. This was followed by gains of 29% in the West and 15.2% in the South. The Midwest region, however, slid 6.4%. The inventory of new homes for sale at the end of May was 318,000, reflecting a 5.6-month supply. Meanwhile, the median price for a new home sold last month was $317,900, down 1.7% year over year.
Is Housing Market Recovering From Coronavirus Slowdown?
The momentum in the U.S. housing market seems to be returning and some encouraging data sets are emerging from the sector. The May data on U.S. housing starts and building permits reflect improvement in U.S. homebuilding. According to the Commerce Department, housing starts jumped 4.3% to a seasonally adjusted annual rate of 974,000 units in May per a National Association of Home Builders (NAHB) press release. The metric compares favorably with the fall of 26.4% in April and 19% in March. Building permits, a construction pointer for the coming months, climbed 14.4% to a rate of 1.220 million units in May. The latest data on the U.S. homebuilder confidence seems encouraging even as the number of coronavirus cases continues to spike in the United States.
Notably, new home sales are generally considered a dependable metric for housing market health as it is calculated at the signing of a contract. Upbeat on the new home sales data, Yelena Maleyev, associate economist at Grant Thornton, has said, "the housing market has held on relatively well during this service sector recession as would-be buyers have taken advantage of incredibly low mortgage rates, despite only viewing the homes online in many cases", per a Bloomberg article.
Low interest rates are boosting demand in the housing market, resultantly, an increase in mortgage applications is being observed. Going by a Reuters article, data suggests that applications for loans to purchase a home rose to a near 11-1/2-year high in the week ending Jun 12. Mortgage applications are also believed to have risen above the pre-pandemic levels (per a CNBC report).
Per a MarketWatch article, a Realtor.com report reflects that price gains have rebounded to their pre-coronavirus levels, which is also an indicator of improving housing market conditions. Meanwhile, scarcity of inventories persists, which might lead to further price increases. However, low employment levels and fears of a second wave of coronavirus outbreak will continue to dampen the momentum of the housing market in the United States.
Housing ETFs That Might Gain
In such a scenario, here are a few housing ETFs that investors can keep an eye on:
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 $1.45 billion, 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 carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (read: Sector ETFs & Stocks to Explode as Fed Remains Dovish).
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 an AUM of $784.1 million. The fund charges 35 bps in annual fees and carries a Zacks ETF Rank of 3, with a High-risk outlook (read: Housing ETFs Sizzle With Opportunities as Economy Reopens).
Invesco Dynamic Building & Construction ETF (PKB - Free Report)
This fund follows the Dynamic Building & Construction Intellidex Index, holding well-diversified 31 stocks in its basket, each accounting for less than a 5.25% share. It has amassed assets worth $77.7 million. The expense ratio is 0.60%. It is a Zacks #3 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 >>