7 ETF Areas to Gain from a Rebounding Housing Market
The U.S. housing market has rebounded lately. Existing home sales, which makes up about 90% of the sector’s sales, rose 2.3% sequentially to a seasonally adjusted annual rate of 4.3 million in May 2023. The median existing-home price for all housing types decreased by 3.1% year-on-year to $396,100. U.S. home prices recorded first annual decline in 11 Years.
However, a healthy housing market, reflected by a 3.8% monthly increase in unsold existing homes to 1.08 million, reflects the potential for growth. Sales of new single-family houses jumped 12.2% sequentially to a seasonally adjusted annualized rate of 763K in May of 2023, the highest level since February last year, and compared to forecasts of 675,000.
Homebuilder sentiment came out of negative territory for the first time in nearly a year, helped by a relatively limited housing supply and improving supply chain efficiencies. This, along with steady mortgage rates resulted in the recovery of the long-ailing sector.
Industry ETFs To Gain
Home Construction ETFs
ETFs that focus on home construction, such as the iShares U.S. Home Construction ETF ITB and the SPDR S&P Homebuilders ETF XHB, are sure to jump on the housing market rebound. A limited housing supply, uptick in sales, could increase demand for home construction, thereby boosting these ETFs.
Materials ETFs
Rising home construction will lead to higher demand for materials. Business of suppliers of building materials and related equipment should see a surge. This, in turn, should benefit the likes of Materials Select Sector SPDR ETF XLB.
Retail ETFs
The housing market recovery could indirectly boost retail ETFs, particularly those with heavy exposure to home improvement and furnishing companies. When people buy homes, they often purchase new furniture and appliances. They tend splurge on renovation and decorations. Therefore, funds like SPDR S&P Retail ETF XRT and VanEck Vectors Retail ETF RTH will likely to benefit.
Financial ETFs
Such a situation could have a positive impact on financial ETFs, especially those are into mortgage-lending companies. ETFs such as Financial Select Sector SPDR Fund XLF and Vanguard Financials ETF VFH could see gains due to increased mortgage activity.
Insurance ETFs
New homeowners need homeowner's insurance, and existing homeowners may update their policies if their home increases in value. This would benefit insurance industry, thus benefitting ETFs like iShares U.S. Insurance ETF IAK.
Lumber ETFs
Manufacturers of construction materials like lumber could see increased demand due to more home construction.iShares Global Timber & Forestry ETF WOOD could be a beneficiary.
Technology ETFs
The PropTech sector, which includes technologies intended to reorganize and improve the real estate market, could see increased demand. Such efforts include online marketplaces for buying/selling homes, virtual tour technology, and more. Hoya Capital Housing ETF HOMZ gives exposure to rental operators, homebuilders, home improvement companies, and real estate services and technology firms.
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Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
SPDR S&P Homebuilders ETF (XHB): ETF Research Reports
SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Retail ETF (RTH): ETF Research Reports
iShares U.S. Home Construction ETF (ITB): ETF Research Reports
Vanguard Financials ETF (VFH): ETF Research Reports
iShares U.S. Insurance ETF (IAK): ETF Research Reports
iShares Global Timber & Forestry ETF (WOOD): ETF Research Reports
Hoya Capital Housing ETF (HOMZ): ETF Research Reports
