U.S. new home sales experienced their best month in over eight years, buttressing homebuilders sector-related exchange traded funds.
On Tuesday, the SPDR S&P Homebuilders ETF (NYSEArca: XHB) rose 2.9% and iShares U.S. Home Construction ETF (NYSEArca: ITB) gained 3.8%. XHB broke above its short-term resistance at the 50-day simple moving average and is testing its long-term, 200-day average. ITB, on the other hand, surged above its 50- and 200-day average.
The home construction industry bounced Tuesday after the Commerce Depart revealed purchases of new, single-family homes increased 16.6% in April month-over-month, the fastest pace since January 2008, reports Jeffrey Sparshott for the Wall Street Journal.
The median price of a new home also rose to $321,100 in April, up 9.7% year-over-year, and was the highest level on record.
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”The fundamentals for new home sales are good, and getting better: more jobs, rising wages, more household formations, and very low mortgage rates,” Gus Faucher, deputy chief economist at PNC Financial Services, told the WSJ.
Moreover, sales of existing homes, which make up the majority of the housing market, increased for the second straight month in April.
[related_stories]”We continue to believe the drivers are in place to sustain the current housing market’s slow but steady growth,” Robert Toll, executive chairman of luxury home builder Toll Brothers Inc., said.
Contributing the rise in home prices, low housing inventories have limited the overall market. The inventories of new homes tightened in April. Given the current sales pace, it could take 4.7 months to exhaust the supply of newly built homes, compared to a projected 5.5 months for the prior month.
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Further fueling the rally in homebuilders, the Toll Brothers (NYSE: TOL) revealed quarterly revenue surged 31% on luxury home sales, beating analysts’ estimates, Reuters reports.
TOL shares jumped 7.8% Tuesday. TOL makes up 5.9% of ITB’s underlying portfolio and 4.2% of XHB.
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iShares U.S. Home Construction ETF