With plenty of signs pointing to strength for the housing market in 2020’s early stages, some related investments are perking up. For example, the Hoya Capital Housing ETF (HOMZ) is up more than 4% to start the new year.
Hoya Capital Real Estate, a research-focused investment advisor specializing in real estate securities, launched HOMZ earlier this year, making it the first ETF to offer diversified exposure across the entire US housing sector. The fund debuted last April.
“The U.S. housing industry has picked up in 2020 where it left off in the back-half of last year with signs of continued reacceleration following a notable slowdown that dragged into mid-2019,” said Hoya Capital in a recent note.
HOMZ tracks the Hoya Capital Housing 100 Index, a rules-based index composed of the 100 companies that collectively represent the performance of the US Housing Industry. According to Hoya Capital, the ETF is designed to track total spending on housing and housing-related services. The underlying index is composed of four US Housing Industry Business Segments, each weighted based on their relative contribution to US Gross Domestic Product.
Highs For HOMZ
Data underpin the ascent of HOMZ this year. Homebuilder confidence got a boost in light of last week’s data, which showed that construction starts in the U.S. grew to a 13-year high with 1.61 million starts in December, according to data from the Commerce Department
“Resilient demographic-driven growth in household formations along with the sharp pullback of the 30-year fixed mortgage rate since peaking in late 2018 have stimulated renewed activity across nearly all segments of the housing industry after a decade that saw historically low levels of new home construction activity and an accumulating housing shortage across many major markets,” said Hoya Capital.
Lower mortgage rates could continue to give the housing market a much-needed boost, which could translate to more strength for homebuilders. Rising rates, low affordability and rising homebuilder costs due to tariffs have been thorns in the side for the housing market.
This year, the central bank has been keen to keep interest rates unchanged. In addition, the central bank alluded to possible rate cuts for the rest of 2019. Once again, however, the rising costs of supplies could keep home prices rising, but that could be tempered if the current labor market remains robust.
For more information on the housing market, visit our homebuilders category.
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.