Home Construction ETF Breaks, Home Builder Sets Up for Further Downside
The home construction exchange-traded fund (ETF) ITA, which tracks the Dow Jones US Home Construction index, has broken an important trend line. Not only could this lead to further declines in the home construction sector, a home builder is also setting up for further downside.
The home building sector has been a bright spot for the US economy since the COVID-19 pandemic began. Low interest rates and pandemic-induced consumer demand have fueled a housing boom even in the midst of the worst economic downturn since the Great Depression.
However, the party could be coming to an end for home construction as the ITA ETF has broken a key technical support level. The ETF, which tracks an index of home construction stocks, closed below its 200-day moving average for the first time since September 2019. This could be a sign that the sector is set for further declines.
Adding to the bearish outlook is the fact that a home building company, which the index tracks, is setting up for further downside. The company is D.R. Horton, Inc. (DHI), the country’s largest homebuilder. The company’s share price is currently trading below its 50 and 200-day moving averages, potentially pointing to further losses in the near future.
It remains to be seen if the home construction sector can turn things around. Low interest rates are likely to stay in place for some time, giving the sector some support. But it could be a volatile road ahead as investors watch to see if the ETF and leading homebuilder can break out of their recent downtrends.