“Home Construction ETF Plummets and Home Builder Prepared for Further Decline!

The homebuilding industry has been in a downward trend for nearly two decades, and the recent pandemic has only exacerbated the situation. Over the past year, as the demand for single-family homes has slowed, ETFs have been breaking and a homebuilder’s stock has been setting up for further downside. Exchange-traded funds (ETFs) that focus on the homebuilding industry have been feeling the effects of the pandemic as the sector has dropped about 16% since the start of 2021. For instance, the iShares U.S. Home Construction ETF, previously known as the iShares US Home Construction Fund, has been in a steady decline since late February. At the same time, shares of homebuilder Lennar Corporation, one of the four largest homebuilders in the U.S. and an integral component of the aforementioned ETF, have been decreasing as well. On March 31, the company reported a drop in quarterly revenue and an estimated loss of more than $300 million in the first quarter of 2021. Lennar’s stock has since been trading near its lowest level of the past 12 months – setting up for further downside. The pandemic has stalled the homebuilding sector, with many homebuyers putting off moving to a new place and opting to stay home instead. As a result, demand for housing has plummeted and prices have fallen. To make matters worse, rising lumber prices have contributed to the risk of further declines in the near future. The grim outlook for the homebuilding industry is expected to persist for some time yet. Nevertheless, investors looking to capitalize on the volatile market should consider taking a longer-term view, as the fundamentals of the sector remain sound and the potential for a recovery is still present. Buying shares of companies that have a strong balance sheet, such as Lennar Corporation, is one way to gain exposure to the homebuilding sector while providing a hedge against potential losses. In conclusion, while the homebuilding industry has been in a downtrend for almost two decades, the recent pandemic brought further declines upon the sector. ETFs focused on the homebuilding industry have been feeling the pain, and Lennar Corporation’s stock has also been setting up for further downside. Still, investors looking to capitalize on the volatile market should look past the short-term effects of the pandemic and focus on the long-term potential of the sector.