Despite a frigid winter, the housing market has remained resilient, with new home purchases unexpectedly rising to over a five-year high, reinforcing the home construction sector and related exchange traded funds.
The SPDR S&P Homebuilders ETF (NYSEArca: XHB) jumped 3.4% Wednesday while the iShares U.S. Home Construction ETF (NYSEArca: ITB) surged 3.8%, both trading on above average volume.
January new home sales exceeded expectations, increasing 9.6% to a 468,000 annualized pace, the most since July 2008, reports Michelle Jamrisko for Bloomberg.
Housing sector observers remain bullish as property values continue to rise, the economy strengthens and unemployment rates fall. However, industry experts point to limited housing supply, rising borrowing costs and tight credit conditions as major hurdles that are still holding back the sector.
“I’m hopeful the recovery in home sales will get back on track in the next couple of months,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said in the article. “If we continue to get solid employment growth, which was the trend last year, chances are you’ll see home sales continue their uptrend.”
New home sales in the Northeast led the rise last month, jumping 73.7%, the largest rise since July 2012, even with the series of polar blasts. Meanwhile, sales rose 11% in the West and 10.4% in the South, but declined 17.2% in the Midwest.
Freezing temperatures pressure the housing market as frozen grounds deter builders from starting work and buyers from looking at properties.
SPDR S&P Homebuilders ETF
For more information on the housing market, visit our homebuilders category.
Max Chen contributed to this article.