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Post: ETF Wrap: ‘Lots of stagflation in the new home market’: Homebuilder ETFs are struggling

Hi! In this week’s ETF Wrap, we look at the steep drop in homebuilder ETFs this year, as new homes sales have fallen in the U.S. amid high prices and rising interest rates. 

Please send tips and feedback to christine.idzelis@marketwatch.com. You can also find me on Twitter at @cidzelis and LinkedIn.

Homebuilder exchange-traded funds are sliding this year, pummeled by rising interest rates and soaring prices in the housing market.

Shares of the iShares U.S. Home Construction ETF

and SPDR S&P Homebuilders ETF

have each tumbled more than 30% in 2022 through Wednesday, according to FactSet data. The Hoya Capital Housing ETF

dropped 22% over the same period, while shares of the Invesco Dynamic Building & Construction ETF

slid almost 26%. 

All four ETFs have been trading below their 50-day moving average for most of this year, FactSet data show. 

“That’s a very important resistance line” to get above for “any sense that momentum could shift to the positive,” said Frank Cappelleri, a desk strategist at Instinet, in a phone interview. 

On Tuesday, the SPDR S&P Homebuilders ETF hit a new 52-week low, according to Cappelleri. That’s the day the U.S. government released data showing new home sales tumbled in April. 

“There’s lots of stagflation in the new home market,” wrote Yardeni Research in a note Tuesday. “A combination of soaring home prices and rapidly rising mortgage rates have slammed the affordability of buying a home.”

Sales of new homes in the U.S. slowed in April to an annual rate of 591,000, a steep 16.6% drop from 709,000 in March, according to data released Tuesday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. That marked a fourth straight month of declines. 

Meanwhile, the median price of a new home jumped 19.6% year-over-year to a record $450,600, Yardeni Research wrote. “It is up 45.3% over the past 24 months, while the average price is up 58.3% over the same period!”


Adding to concerns over a slowing real-estate market, the National Association of Realtors said Thursday that its index of pending U.S. home sales fell 3.9% in April for a sixth straight month of declines. Lawrence Yun, the group’s chief economist, predicted in the statement that existing-home sales may fall 9% in 2022, saying contract signings are at the slowest pace in almost a decade.

“If mortgage rates stabilize roughly at the current level of 5.3% and job gains continue, home sales could also stabilize in the coming months,” said Yun. But “if mortgage rates climb to 6%, then the sales activity could fall by 15%.

Read: Pending home sales fall for sixth straight month due to high prices and mortgage rates

With interest rates rising while inflation runs hot amid growing fears over a slowing economy, Invesco’s Dynamic Building & Construction ETF has seen outflows so far this year, according to Rene Reyna, head of thematic and specialty product strategy at Invesco. 

By contrast, Reyna said by phone that he has seen investors favoring consumer staples, a defensive sector, through demand for the Invesco Dynamic Food & Beverage ETF
Shares of the ETF have dipped just 0.4% this year through Wednesday, compared with a loss of 16.5% for the S&P 500 index
FactSet data show.

“Investors are looking for ways to sort of insulate themselves,” said Reyna.

Here’s your weekly look at the top and bottom performers over the past week through Wednesday, according to FactSet data.

The good…
Top gainers


First Trust Natural Gas ETF

United States Natural Gas Fund


SPDR S&P Oil & Gas Exploration & Production ETF


VanEck Oil Services ETF

iShares U.S. Oil & Gas Exploration & Production ETF

Source: FactSet, through Wednesday May 25, 2022 excluding ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater

…the bad
New ETFs:
  • Putnam Investments said May 23 that it plans to offer three actively-managed ETFs in the coming months, one focused on business development companies, a second targeting companies at the intersection of technology and biology, and a third investing in companies in emerging markets excluding China and Hong Kong. The regulatory filing process for Putnam BDC Income ETF, Putnam BioRevolution ETF and Putnam Emerging Markets ex-China ETF must first be completed.

  • PGIM Investments announced May 24 that it launched the PGIM Floating Rate Income ETF
    an actively-managed fund that invests primarily in senior floating-rate loans. “We’ve seen increased demand for floating rate strategies as investors look to protect against rising rates,” said Stuart Parker, president and chief executive officer of PGIM Investments, in the announcement.

Weekly ETF reads:

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