Home construction and real estate have been a volatile sector over the last few years. The sector has been hurt by rising mortgage rates, falling prices and recently because of the Tariff Wars. Recently, a new exchange traded fund has broken and a home builder has been setting up for further downside.
The Home Construction ETF (ITB) has broken below a key support level which suggests that the already weak housing sector could fall further. The ETF has been trading in a downward trend for most of 2019. The trend has accelerated in the last few weeks as the Tariff Wars have worsened. The Tariff Wars have had a detrimental effect on the housing market and have already pushed mortgage rates higher.
To make matters worse, a leading home builder Lennar (LEARN) has set up for further downside. Earnings for the home builder were weak in the most recent quarter and the stock has been trading in a downward trend for the past month. The trend is expected to continue in the near future as the Tariff Wars continue and the housing market shows few signs of recovery.
Due to the weak housing market and the recent breaks in the Home Construction ETF and a home builder, investors have been selling these stocks and ETFs. While there is a possibility of a short-term recovery, the outlook for the sector remains bearish and investors should stay away from these stocks.