In a higher rate environment, home affordability is diminished and there is less incentive for renters to purchase a new home. Additionally, the more expensive mortgage rates may scare away current homeowners who are thinking about upgrading to a bigger, more expensive home.
Conversely, housing industry experts also argue that higher rates reflect an improving economy and wage growth, which could also help the housing market in the long run. Still, some market observers are worried that the rising mortgage rates could dissuade borrowers to move into new homes.
Another ETF idea to consider is the PowerShares Dynamic Building & Construction Portfolio (NYSEArca: PKB), but that ETF takes a larger focus on consumer discretionary and materials companies.
“Builders are not only pleased with Trump’s first move on water, they also expect further deregulation to bring down construction costs. There are, however, other roadblocks keeping the nation’s builders from producing more homes, which are sorely needed in today’s tight housing market,” according to CNBC.
For more information on the housing sector, visit our homebuilders category.