Homebuilder ETFs Climb as Investors Return to This Battered Segment

Homebuilder stocks and sector-related ETFs led the charge on Monday as investors hoped for a turning point in the coronavirus pandemic.

Among the best performing non-leveraged ETFs of Monday, the iShares U.S. Home Construction ETF (NYSEArca: ITB) increased 13.8%, SPDR S&P Homebuilders ETF (NYSEArca: XHB) advanced 12.0%, and Invesco Dynamic Building & Construction ETF (NYSEArca: PKB) rose 11.3%.

The broad markets rallied Monday after reports that daily deaths and the spread of the coronavirus outbreak was slowing down.

“Everyone is just desperate for good pieces of news,” Peter Cecchini, chief market strategist at Cantor Fitzgerald, told the Wall Street Journal. “It doesn’t necessarily reflect anything fundamental. Nothing’s changed.”

Home construction stocks or homebuilders were among the best performers after suffering a deep blow during the worst of the selling in response to fears that the pandemic could last longer than expected and even upend the housing market’s traditional spring selling season.

Some have already gained an interest in the beleaguered sector before Monday’s gains.

The homebuilders “have gotten destroyed during this sell-off over the past 30 days,” John Petrides, portfolio manager in the wealth management division of Tocqueville Asset Management, told CNBC, adding that he “would agree, in general, that this group is attractive here.”

Unlike the 2007-2009 financial crisis, housing is not directly related to the current distress we are experiencing, which could mean stability for homebuilders in the mid- to long-term once things settle down, Petrides added.

“A year from now, we could be talking about pent-up demand in those people that are looking to buy a house, wanting to get into the market,” Petrides said. “One very important … investment theme that investors were playing on [was]the move out of the suburbs and into big cities, and I’m wondering if COVID-19 will see a reversal of that, that there could be some hesitancy to move into very densely populated areas in big cities and more of a favorable move toward the suburbs.”

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