Pending Home Sales Put a Wrench in Homebuilder ETFs’ Recovery

ETF Trends

Homebuilder exchange traded funds decline Monday as the pending home sales for June slide from a six-year high and ahead of S&P Case-Shiller report tomorrow.

The SPDR S&P Homebuilders ETF (XHB) was down 0.3% Monday and iShares U.S. Home Construction ETF (ITB) remained unchanged. XHB has gained 11.5% year-to-date while ITB rose 3.2%.

According to the National Association of Realtors, the seasonally adjusted index for pending home sales weakened 0.4% in June from 111.3 in May, a six-year high, reports Christopher S. Rugaber for USA Today. The index is still at its highest since December 2006.

“This latest move down in pending home sales may reflect some weakening in activity related to the recent increase in mortgage rates as well as limited available inventory for sale,” Daniel Silver, an economist at JPMorgan, said in a Reuters article. [Rising Mortgage Rates Turning the Lights Out at Homebuilder ETFs]

Nevertheless, others remain optimistic, pointing to the modest decline as an indication that higher mortgage rates are having a minimal impact on home sales – the 30-year fixed mortgage rate was at a two-year high of 4.51% in late June and hovered around 4.31% last week.

“All told … pending home sales held up fantastically well,” Dan Greenhaus, chief global strategist at BTIG, said in a note.

On Tuesday, the housing sector will be watching for the S&P Case-Shiller home price index May data. The index was 1.7% higher in April after a 1.9% rise in March, according to Bloomberg data. The index provides monthly changes in the price of residential real estate in 20 metropolitan areas over the U.S.

SPDR S&P Homebuilders ETF

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For more information on the housing sector, visit our homebuilders category.

Max Chen contributed to this article.

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.

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