New home sales fell 6.80% in June
The iShares US Home Construction (ITB) fell 2.20% on the housing indicator news from the U.S. Census Bureau on July 24. New home sales fell by 35,000 in June. They were way below consensus estimates of 550,000. ITB invests in popular homebuilders including D.R. Horton (DHI), Lennar (LEN), and Toll Brothers (TOL). These stocks represent 11.15%, 11.19%, and 7.90% of ITB’s portfolio.
However, the broader real estate market-tracking iShares U.S. Real Estate ETF (IYR) rose 0.03%. It was supported by the leading indicator report that came out on Thursday—indicating a pickup in housing permits. The housing sector continues to give mixed signals in terms of economic indicators.
482,000 new homes were sold, according to the June report
Is more home price appreciation in the cards?
The above chart shows IYR’s price movement against existing home sales—both monthly—since June 2014. In 2015, the real estate sector has largely shown a falling trend, even though new home sales have shown a mild rising trend. Consumers and investors in the US real estate sector are still cautious about their existing and prospective investments in the sector.
Tight supply, due to the winter weather earlier this year, has been a factor. It has driven up home prices. The looming interest rate hike has a direct bearing on mortgage rates. As a result, investors in US real estate may become even more wary of investing in the sector.
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