Homebuilder ETFs fall as home equity hits new highs
DDespite recent fears of a slowdown in the housing market due to rising interest rates, equity in multi-unit housing has reached new highs.
According to new analysis from Black Knight, a mortgage software and analytics firm, the funds available for mortgage holders to withdraw from their homes while maintaining a 20% equity cushion have soared by a historic amount. of $1.2 trillion in the first quarter of 2022. The amount represents the largest quarterly gain since the company began tracking the statistic in 2005.
“It really is a bifurcated landscape — one that is becoming increasingly difficult for those looking to buy a home, but at the same time is a boon for those who are already homeowners and have seen their real estate wealth increase significantly over the past two years,” said Ben Graboske, president of Black Knight Data & Analytics. . “Depending on where you are, this could be the best or the worst of all possible markets.”
After a torrid surge to the upside, in what some experts consider another real estate bubble, there are signs that the surge in home prices may be slowing. Black Knight measured house prices in April, showing they were 19.9% higher year over year, down from the 20.4% gain seen in March. The decline in growth could be a harbinger of more to come, given that interest rates continue to rise, as rising interest rates generally dampen house prices.
“The April drop is more likely a sign of a slowdown caused by the modest rate increases in late 2021 and early 2022 when rates started to rise,” Graboske said. “The March and April 2022 rate spikes will take time to show up in repeat sales indices.”
Yet the supply of available housing remains limited, with active listings about two-thirds below pre-pandemic levels and around 820,000 listings less than a normal spring period. Homeowners may choose to simply spruce up their homes rather than sell them.
“Record home price appreciation, strong home sales and strong incomes are all contributing to stronger renovation activity in our nation’s major metros, especially in the south and west,” Sophia said. Wedeen, researcher in the Remodeling Futures Program at the Center. .
Additionally, supply chain issues have plagued homebuilders with ETFs like iShares US Home Construction ETF (NYSEArca: ITB) decrease of 28.7%, SPDR S&P Homebuilders ETF (NYSEArca: XHB) down 26.3%, and Invesco Dynamic Building & Construction ETF (NYSEArca: PKB) down 21.7% this year.
However, for those looking to invest in the real estate market using ETFs, funds like the FlexShares Global Quality Real Estate (GQRE) Index Fund or the Virtus Duff & Phelps Global Real Estate Securities Fund (VGISX), which is a five-star fund, rated by Morningstar, and offers exposure to a wide range of global real estate markets.
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