US home sales hit their slowest pace in over a year as elevated mortgage rates and record-high prices continue to stifle market activity, pressuring homebuilder sentiment.
The XHB ETF is negatively impacted by the decline in existing home sales, which dropped to a 3.98 million unit annual pace in August. With mortgage rates reaching a 6.71% benchmark and median home prices hitting record August highs of $429,100, the combination of high borrowing costs and elevated prices is suppressing buyer demand, directly threatening the revenue growth of homebuilders within the fund.
Mortgage rates are increasing due to rising long-term bond yields, which are being pushed up by expectations of higher inflation linked to surging oil prices.
ITB faces significant headwinds as the housing market struggles with a 2% monthly decline in existing home sales and the highest mortgage rates seen in over a year. The persistent rise in median home prices for 38 consecutive months, coupled with a sales pace significantly below the historic norm of 5.2 million units, suggests a cooling environment that could dampen construction activity and profitability for the companies held in this ETF.
The U.S. median sales price reached $429,100 in August, marking an all-time high for the month of August based on data dating back to 1999.
Existing home sales fell for the third consecutive month in August, reaching a seasonally adjusted annual rate of 3.98 million units. Rising mortgage rates, which hit a 6.71% average, continue to suppress buyer demand while median home prices climbed 1.6% to a record $429,100 for the month.
Sales are constrained by a combination of record-high median home prices and rising mortgage rates, which have reached their highest levels in over a year.