jar546
Forum Coordinator
In 2023, the U.S. housing sector is thriving, with major homebuilders experiencing exceptional growth. Lennar Corp. (LEN) and DR Horton (DHI) have seen their stocks rise by over 60%, while PulteGroup (PHM) has surged by approximately 130%. This remarkable performance reflects the strong investor confidence in these companies and the broader homebuilding industry.
Notably, exchange-traded funds (ETFs) related to home construction have also fared well. The iShares U.S. Home Construction ETF (ITB), SPDR S&P Homebuilders ETF (XHB), and Invesco Building & Construction ETF (PKB) have posted gains of 65.8%, 56.5%, and 51.7%, respectively, this year.
The primary driving force behind this growth is the shortage of inventory in the resale market, which has sparked increased demand for new homes. Recent reductions in mortgage rates and signals from the Federal Reserve regarding potential rate cuts have revitalized the housing market. Given the homebuilding sector's sensitivity to interest rate fluctuations, it stands to benefit from this positive momentum.
Mortgage rates dropped below 7%, the lowest since August, and have remained at their lowest levels since July. This has led to a surge in potential buyers and an increase in home sales. Consequently, new home construction has seen a resurgence, reaching its highest level since May.
The Federal Reserve's projection of three rate cuts for 2024 has bolstered builders' optimism. Homebuilder sentiment improved in December, marking the first increase in five months, as reported by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Furthermore, homebuilders are in a favorable position, belonging to a top-ranked Zacks industry (within the top 21% of 250+ industries), indicating a positive outlook. The combination of limited supply, rising demand, and declining interest rates has generated significant optimism in the sector.
ETF Details:
Notably, exchange-traded funds (ETFs) related to home construction have also fared well. The iShares U.S. Home Construction ETF (ITB), SPDR S&P Homebuilders ETF (XHB), and Invesco Building & Construction ETF (PKB) have posted gains of 65.8%, 56.5%, and 51.7%, respectively, this year.
The primary driving force behind this growth is the shortage of inventory in the resale market, which has sparked increased demand for new homes. Recent reductions in mortgage rates and signals from the Federal Reserve regarding potential rate cuts have revitalized the housing market. Given the homebuilding sector's sensitivity to interest rate fluctuations, it stands to benefit from this positive momentum.
Mortgage rates dropped below 7%, the lowest since August, and have remained at their lowest levels since July. This has led to a surge in potential buyers and an increase in home sales. Consequently, new home construction has seen a resurgence, reaching its highest level since May.
The Federal Reserve's projection of three rate cuts for 2024 has bolstered builders' optimism. Homebuilder sentiment improved in December, marking the first increase in five months, as reported by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Furthermore, homebuilders are in a favorable position, belonging to a top-ranked Zacks industry (within the top 21% of 250+ industries), indicating a positive outlook. The combination of limited supply, rising demand, and declining interest rates has generated significant optimism in the sector.
ETF Details:
- iShares U.S. Home Construction ETF (ITB): This ETF provides exposure to U.S. residential home manufacturers by tracking the Dow Jones U.S. Select Home Construction Index. With $2.4 billion in assets under management (AUM), it holds 46 stocks with a concentration on the top two firms. The ETF charges an annual fee of 40 basis points and has a Zacks ETF Rank #3 (Hold) with a High risk rating.
- SPDR S&P Homebuilders ETF (XHB): This ETF offers diversified exposure to homebuilders across various sectors such as building products, home furnishing, home improvement retail, home furnishing retail, and household appliances. It tracks the S&P Homebuilders Select Industry Index, holding 35 stocks. With $1.7 billion in AUM and an average daily volume of 4 million shares, it charges an annual fee of 35 basis points and holds a Zacks ETF Rank #3 with a High risk outlook.
- Invesco Building & Construction ETF (PKB): This ETF follows the Dynamic Building & Construction Intellidex Index, holding 32 well-diversified stocks with no single stock accounting for more than 5.1% of the assets. It has accumulated assets worth $246.1 million and experiences lower daily trading volume of approximately 17,000 shares on average. The expense ratio is 0.62%, and it has a Zacks ETF Rank #3 with a High risk rating.