According to data on new home sales, the homebuilder sector experienced a boost, which caused it to edge higher on Tuesday. This occurred despite the broader stock market experiencing a selloff. The iShares U.S. Home Construction exchange-traded fund ITB increased slightly by less than 0.1%, moving towards a 15-month high during morning trading. The shift represents a reversal from earlier times when the intraday losses reached as high as 0.2%. The S&P 500 SPX experienced a decrease of 0.7% during the same time.
Active homebuilders within the ETF saw increases in shares, PulteGroup Inc. PHM experienced gains of 2.0%, Toll Brothers Inc. TOL tacked on 0.4%, and Lennar Corp. LEN rose 0.1%. Only D.R. Horton Inc. DHI saw a slip, experiencing a decrease of 0.4%. PulteGroup gained additional stock value due to better-than-expected performance during the third quarter of the year.
The National Association of Realtors reported that sales of new homes increased by 14% in August. This accounted for approximately 1.01 million units sold year-over-year, surpassing the expectations of economists, which was a maximum of 900,000 units. The Northeast, Midwest, and South saw increases in sales, while the West experienced a decrease in sales. Experts believe that the low mortgage rates and migration to the suburbs caused this growth in sales.
With the events of the COVID-19 pandemic in mind, many people are sticking closer to home, which is fueling the desire to purchase new homes. It’s seen as a way to improve their living conditions in the present while utilizing low mortgage rates to secure their future. With the rise of remote working and learning, larger homes with more space for multiple occupancies are highly desirable.
Due to these factors, many homebuilder stocks have skyrocketed despite the current slump in the economy. For example, homebuilder Lennar Corp. LEN reported earnings that surpassed estimates by double digits. This was helped along by a shift to digital technology to engage with potential buyers. M/I Homes (MHO), another homebuilder, reported increased traffic steadily throughout the year, with more and more American buyers.
Lastly, Toll Brothers Inc. (TOL), who has a reputation for building luxury homes, reports demand for their customized homes hasn’t decreased during this pandemic. The company is focusing on expanding its construction in a variety of states from the East Coast to California.
In conclusion, the sales of new homes have surged, helping to breathe life into the previously stagnate housing market. Many factors, such as low mortgage rates and a newfound desire for more space, have contributed to this growth in sales. Many homebuilder stocks have risen due to this trend, showing that even in tough times, the right industries can still thrive.
