• To the surprise of countless pundits and experts, the U.S. housing industry has assumed a very different role during this economic crisis, serving as the unexpected leader throughout the early recovery.
• A confluence of near-term positive factors and long-term tailwinds converged over the last eight months that have generated a highly favorable environment for the U.S. housing industry.
• Homebuilders have been at the heart of this rebound, capitalizing on record-setting homebuying demand. However, builders are struggling to keep-up as inventory levels declined to record-lows while the backlog swells.
• While policymakers have prioritized support for the critical U.S. housing markets throughout the COVID crisis and long-term tailwinds remain compelling, we believe that an unexpected rise in interest rates is the primary risk factor for builders.
• Housing remains a deeply “unloved” sector despite the compelling long-term tailwinds at its back. Remarkably, homebuilders trade with single-digit forward P/E multiples despite their stellar projected growth rates.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.