The US housing market has been one of the most popular investments over the past decade. Investors have been able to capitalize on the rising home prices and the steady appreciation of housing values. However, in recent months, concerns about a possible slowdown in the market have made many investors wary of investing in home-based equities.
In response to these concerns, one exchange-traded fund (ETF) has recently broken its twelve-month low. The iShares US Home Construction ETF (ITB) is an ETF that tracks the performance of homebuilders and real estate related companies in the US. The ETF has recently hit a twelve-month low of $18.57, down about 17.8% from its 52-week high of $23.17.
The decline in the ITB is likely due to several factors. First, the US real estate market is cooling off, and many economists are forecasting a decline in home sales over the next few months. Second, the economy has begun to show signs of slowing in 2019, with GDP growth rates slowing in the fourth quarter. Finally, the US-China trade war continues to weigh on the market, as businesses and consumers alike have become more cautious in their spending decisions.
Meanwhile, one homebuilder is setting up for further downside. Lennar Corporation (LEN) is one of the largest homebuilders in the US and is often seen as a bellwether for the market. The company recently reported weak earnings for their fourth quarter and is now forecasting that they will miss their guidance for 2019. The company is trading near its 52-week low of $45.82, and the technical picture does not look much better. The stock has been trading below its 50 and 200-day moving averages, and analysts at Zacks Investment Research recently lowered their rating on the stock to a “Sell”.
The US housing market has been a buoyant sector for the past decade, but recent economic data and forecasts point to a possible downturn in the sector. Consequently, investors in home-based equities have had to contend with a declining ITB and a homebuilder setting up for further downside. While no one can predict the future, it may be wise to proceed with caution before investing in the US housing market.