Mortgage Rates At 2-Month Low: Homebuilder ETFs In Focus
Zacks Investment Research | Dec 11, 2018 05:33AM ET
The average U.S. 30-year mortgage rate is around a fallen below the 3% level for the first time in nearly two months .
The inventory situation has started improving in some regions. On a yearly basis, Denver, Seattle, San Francisco and San Diego saw some of the largest increase in listings for October (read: Real Estate ETFs at One-Month High: Here's Why ).
Although mortgage rates have been on a downtrend for the last three weeks, buyers do not seem ready to enter the expensive housing markets where affordability is at the lowest level in a decade . Per, Mortgage Bankers Association's seasonally adjusted index, total mortgage volumes rose 2% last week (ended Nov 30) compared with the previous week. However, the applications are 19% lower than the year-ago volumes.
Friday’s U.S. jobs data would be having an impact on mortgage rates. U.S. nonfarm payrolls increased by 155,000 last month, below the economist’s median forecast of 200,000 jobs. This weaker-than-expected jobs data would keep the bond rates and mortgage rates low as investors would expect a data-dependent Fed to hold off rate hikes next year after a highly likely fourth hike this month. Against this backdrop, we highlight the following homebuilder ETFs in detail (see: all the Industrials ETFs here ):
iShares U.S. Home Construction ETF (WA:ITB)
This fund tracks the Dow Jones U.S. Select Home Construction Index comprising companies building residential homes, including manufacturers of mobile and prefabricated homes. There are a total of 47 holdings in the basket, with D.R. Horton Inc (NYSE:DHI) occupying the top weight of 13.8%. The fund’s AUM is $801.2 million and expense ratio is 0.43% (read: Housing Market Facing Strong Headwinds: ETFs in Focus ).
SPDR S&P Homebuilders (NYSE:XHB) ETF XHB
This fund tracks the S&P Homebuilders Select Industry Index targeting industries like building products, home furnishings, home improvement retail, home furnishing retail and household appliances. It is an equal-weighted fund. It comprises 35 holdings and Whirlpool Corporation (NYSE:WHR) occupies the top position with 5.3% weight. The fund’s AUM is $656.7 million and expense ratio is 0.35%.
Invesco Dynamic Building & Construction ETF PKB
This fund tacks the Dynamic Building & Construction Intellidex Index targeting companies providing construction and related engineering services for building and remodeling residential properties, commercial or industrial buildings, or working on large-scale infrastructure projects, such as highways, tunnels, bridges, dams, power lines and airports. It comprises 30 holdings, and Tractor Supply Co (NASDAQ:TSCO) (6.4%) is at the top. The fund’s AUM is $142.5 million and expense ratio is 0.58%.
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