Exchange-traded funds (ETFs) that invest in stocks linked to home builders have seen a remarkable surge this week, surpassing the performance of the Dow Jones Industrial Average and S&P 500 index.
The iShares U.S. Home Construction ETF (ITB) has experienced a staggering 13% increase so far this week, marking its best weekly performance since May 2020, according to FactSet data. Similarly, the SPDR S&P Homebuilders ETF (XHB) has climbed 11% during this week’s Friday afternoon trading, potentially achieving its biggest weekly gain since November 2022.
Chief Investment Officer at Facet, Tom Graff, expressed his confidence in the homebuilders’ market, stating that there is significant pent-up demand for housing. Many homeowners are reluctant to sell due to their favorable mortgage terms, resulting in a surge in new home sales despite a decline in existing home sales.
Furthermore, the recent drop in 10-year Treasury yields may lead to lower mortgage rates, subsequently benefiting home builders.
The yield on the 10-year Treasury note (BX:TMUBMUSD10Y) experienced its largest weekly decline since March, dropping 28.9 basis points to 4.557% according to Dow Jones Market Data.
In terms of the broader U.S. stock market, all three major benchmarks are poised for significant gains this week. The Dow Jones Industrial Average (DJIA) is expected to achieve a 5.1% weekly increase, while the S&P 500 (SPX) and Nasdaq Composite (COMP) are on track for rises of nearly 6% and 6.6%, respectively, according to FactSet data.
As investors continue to monitor the market’s positive trajectory, the home builder industry remains an area of particular interest with its remarkable performance and favorable market conditions.