The latest National Association of Home Builders/Wells Fargo Housing Market Index showed that homebuilder sentiment was unchanged at 62, but could be a sign that the housing market is beginning to stabilize.
A year ago, the number was 70, but a reading above 50 is considered positive.
“Builders report the market is stabilizing following the slowdown at the end of 2018, and they anticipate a solid spring home buying season,” said NAHB Chairman Greg Ugalde, a homebuilder and developer from Torrington, Connecticut.
A confluence of rising interest rates and low affordability have made the housing market a challenging space in 2018, but that could all be changing with the NAHB/Wells Fargo Housing Market Index holding steady.
Contracts to buy existing homes rose 4.6 percent in January versus December, according to a monthly survey from the National Association of Realtors (NAR). However, contracts were still 2.3 percent lower versus a year ago, which makes it thirteenth straight months of declines annually.
Furthermore, the central bank has been sounding increasingly dovish as of late, which could mean that less rate hikes than anticipated for 2019–something that could help give the sector a much-needed boost.
“More builders are saying that lower price points are selling well, and this was reflected in the government’s new home sales report released last week,” said Robert Dietz, NAHB’s chief economist. “Increased inventory of affordably priced homes — in markets where government policies support such construction — will enable more entry-level buyers to enter the market.”
ETFs that focus on the real estate market include the Vanguard Real Estate ETF (NYSEArca: VNQ), which is up 12.63 percent year-to-date based on Morningstar performance numbers.
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ETF Plays to Consider?
Is a housing market rebound on the way, which could pave the way for other cyclical sectors?
For investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.
Conversely, if investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.
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