After a significant drop in prospective homebuyers, homebuilders’ confidence still looms around historic lows and this may keep homebuilder exchange traded funds (ETFs) from building up. Perhaps today’s numbers will improve things.
In a survey of 384 U.S. developers, the National Association of Home Builders/Wells Fargo housing market index is currently at 9, at least most regions are one point higher than the all-time low in January, according to InvestmentNews. Readings lower than 50 show a negative sentiment in the market and the index has been hovering below 10 since November.
The builders’ assessment gauge dropped below 10 after builders thought buyers would respond to lower mortgage rates and new incentives. The industry had also put their hopes on a $8,000 tax credit for first-time homebuyers, but there have been no significant signs that this stimulus plan helped.
Strict mortgage requirements still mire potential home sales and employers have implemented broad layoffs in recent months. Builders expect sales over the next few months to rise up to 15 on the housing market index scale.
Despite all the dismal housing results, homebuilder ETFs have seen some recent lifts. Today, a report was issued showing that housing starts jumped 22.2% in February from January.
- SPDR S&P Homebuilders (XHB): up 16.2% in the last week; down 10.7% in the last month; down 20.8% in the last three months
- iShares Dow Jones US Home Construction (ITB): up 17.2% in the last week; down 14.3% in the last month; down 26.6% in the last three months
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.