What Awaits Housing ETFs As US Existing Home Sales Fall?

five 3-storey houses in-lined on street

The latest existing home sales data looks disappointing. Per the National Association of Realtors (NAR) report, there was a 3.7% month-over-month decrease in existing homes sales to a seasonally-adjusted annual rate of 6.01 million units in March. However, existing home sales rose 12.3% year over year.

First-time buyers accounted for 32% of sales in March, rising from 31% in February but comparing unfavorably with 34% in the year-ago period. Existing homes sales dropped in the Midwest and South by 2.3% and 2.9% month over month, respectively, in March. Furthermore, sales in the Northeast and West declined a respective 1.3% and 8% from February’s figure.

Commenting on the housing market scenario, Lawrence Yun, NAR’s chief economist, reportedly said, “consumers are facing much higher home prices, rising mortgage rates, and falling affordability, however, buyers are still actively in the market. The sales for March would have been measurably higher, had there been more inventory. Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”

Moreover, the median existing-home price for all housing types was $329,100, up 17.2% year over year in March, marking the 109th consecutive month of year-over-year gains.

How is the U.S. Housing Market Positioned?

The U.S. housing sector has pleased investors with impressive performance amid the tough pandemic times. However, it seems the space is now facing the brunt of rising lumber prices.

Rising softwood lumber, material and labor costs continue to be a major hurdle for homebuilders. The supply chain disturbances caused by the lockdown to contain the coronavirus outbreak have also led to the rise in concrete, metal products, appliances and other expenses, as mentioned in a FOX Business article. Notably, there was an 83.4% year-over-year rise in March in prices of softwood lumber, which is used for constructing frames and trusses of houses, per a Reuters article. Moreover, there was a sharp rise in prices of plywood. These factors are affecting affordability as prices for existing and new homes are soaring.

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