ETFs & Stocks To Ride On A Housing Boom

The housing market has been one of the bright spots of the economy amid slowing growth due to the coronavirus pandemic. This is primarily thanks to ultra-low mortgage rates, and a wave of millennials and others increasingly vying to become homeowner.

Mortgage rates have been on a declining trend, reaching new unprecedented lows. According to Freddie Mac, the 30-year fixed mortgage rate averaged 2.80% for the week ending Oct 22, down from 2.81% the week before and 3.75% a year ago. The current level is the lowest in the survey’s history dating back to 1971. Record-low mortgage rates are encouraging people to buy more homes and have made refinance cheaper. This trend is likely to continue at least this year on the Fed’s easy money policy.

Additionally, home sales have surged in recent months to the highest level in more than a decade. The latest data from the National Association of Realtors revealed that U.S. existing home sales surged in September to levels not seen in more than 14 years. Builder sentiment also surged in October to a record high for the second month in a row.

Moreover, homebuilders are currently well placed, belonging to a top-ranked Zacks industry (placed at the top 3% of 250+ industries), suggesting a solid outlook. However, labor shortage, rising construction costs, and high unemployment remain causes of concern.

Given the bullish trend, investors should tap the booming housing market with the following ETFs & stocks:

iShares U.S. Home Construction ETF (ITB - Free Report)

This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2.4 billion, it holds a basket of 46 stocks with a heavy concentration on the top two firms. The product charges 42 bps in annual fees and trades in a heavy volume of around 3.2 million shares a day on average. It has surged 21.1% so far this year and carries a Zack ETF Rank #3 (Hold) with a Medium risk outlook.

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