The Home Construction ETF Breaks and a Home Builder Sets Up for Further Downside
The home construction industry has been on a rollercoaster ride over the past few months, with the effects of the pandemic forcing a wide range of homebuilding stocks to soar and then collapse. Now, as a major homebuilder joins the downward trend, it appears that the industry may be facing further downside.
The Home Construction ETF (HOMZ) is down almost 8% from its highs earlier this year. This index, which tracks the performance of publicly traded homebuilders, was soaring at the start of the pandemic, as rising demand for homes and low interest rates drove buyers to the market. The index is now down to its lowest levels since last December, and looks to be set for further downside.
On the forefront of this downward trend is Toll Brothers (TOL), one of the biggest homebuilders in the U.S. Shares of TOL have been under pressure lately, as the demand for homes has weakened with the end of the federal stimulus and rising pandemic-related uncertainty. Additionally, the company is expected to face difficulties in the coming quarters, due to rising lumber prices and labor shortages.
Even as other homebuilders show some signs of resilience, it appears that Toll Brothers and the rest of the industry may have some difficulty in the near term. The company’s outlook does not appear to be promising, which could lead to further downside for TOL and the Home Construction ETF. It is unclear at this point how far the homebuilders will fall, but investors should be aware of the potential for further declines.
