Home Construction ETFs Gain on Record U.S. Home Builder Confidence

Home construction stocks and homebuilder sector-related ETFs climbed Monday as U.S. homebuilder confidence increased for the third consecutive month in August, retracing a record high on record low interest rates and a shift toward suburban living in a post-pandemic world.

On Monday, the iShares U.S. Home Construction ETF (NYSEArca: ITB) increased 2.5%, SPDR S&P Homebuilders ETF (NYSEArca: XHB) advanced 1.6%, Invesco Dynamic Building & Construction ETF (NYSEArca: PKB) rose 1.6% and Hoya Capital Housing ETF (HOMZ) gained 1.6%.

The National Association of Home Builders/Wells Fargo Housing Market Index rose 6 points to 78, matching a series record set in 1998, Reuters reports. In comparison, the median expectation among economists was for a rise to 73 from July’s reading of 72.

“Housing has clearly been a bright spot during the pandemic and the sharp rebound in builder confidence over the summer has led NAHB to upgrade its forecast for single-family starts, which are now projected to show only a slight decline for 2020,” NAHB Chief Economist Robert Dietz told Reuters. “Single-family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs, and rural markets as renters and buyers seek out more affordable lower density markets.”

Looking ahead, market watchers will be watching out for the U.S. Census Bureau’s July’s housing starts data on Tuesday. Economists anticipate an increase to 1.24 million units on an annualized basis from 1.186 million in June.

Housing starts plummeted this spring due to the widespread Covid-19 lockdown measures to contain the spread of the virus, but they have since rebounded from a six-year low in April.

Additionally, H=home improvement chains Lowe’s Cos Inc and Home Depot Inc will be releasing their second quarter earnings later in the week. The two companies are expected to have enjoyed a bump to quarterly sales from consumers seeking minor repair work while stuck at home.

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