Robust U.S. Pending Home Sales Bolster Homebuilder ETFs | ETF Trends

Homebuilder sector-related exchange traded funds were among the standout areas of the market Wednesday after an index of U.S. pending home sales surpassed expectations, reflecting steady housing demand despite a weakened economy.

On Wednesday, the iShares U.S. Home Construction ETF (NYSEArca: ITB) increased 2.9%, SPDR S&P Homebuilders ETF (NYSEArca: XHB) advanced 2.7%, and Invesco Dynamic Building & Construction ETF (NYSEArca: PKB) rose 1.8%.

The National Association of Realtors’ index of contract signings to purchase previously owned homes rose 16.6% in June after a 44.3% surge in May, Bloomberg reports. Inc comparison, median forecast of economists called for a 15% month-over-month gain.

The index of pending home sales was at 116.1 in June, the highest level since February 2006.

“It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago,” Lawrence Yun, NAR’s chief economist, said in a statement.

The NAR’s figures reveal the housing market has acted as a key source of support for an economy weighed down by the coronavirus-induced recession. However, elevated unemployment levels and the ongoing fight to quarantine Covid-19 threaten to temper the pace of improvement in residential real estate.

“Housing market activity in June was strong, with buyers benefiting from extremely low mortgage rates that have continued declining all the way through July,” Ruben Gonzalez, chief economist at Keller Williams, told Bloomberg. “If we see a further slowing in the pace of new listings coming on the market as a result of the recent surge in coronavirus cases, and mortgage rates continue to spur demand, we could continue to see upward pressure on home prices.”

The depressed mortgage rates and signs of Americans leaving densely-packed cities are contributing to a housing boom in urban areas, despite the ongoing economic problems. According to a recent Census Bureau report, U.S. homeownership rate in the second quarter was at its highest level since 2008.

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