The bear market in US home sales is finally over, according to a recent note from Ned Davis Research. The firm highlighted that total single-family home sales finally turned positive year-over-year after 39 months of consecutive declines. The 39-month decline in home sales was only outdone by the 43-month decline during the housing bubble from 2005 through 2009.
Homeowners, locked into low rates and unwilling to move, added to low supply and higher prices. The affordability index plunged 39 points from 2021 through 2024, driven by high mortgage rates and ever-rising home prices.
Additionally, the stocks of homebuilders outperformed over the past three years, compared to them underperforming during the 2005 through 2009 stretch. The recent rebound in home sales activity suggests to Tschosik that the housing market should thaw in 2025, enabling a rebound in durable and home improvement spending.
For investors, that means the iShares U.S. Home Construction ETF could be a worthy addition to portfolios for next year. "We are watching ITB for an upgrade. If inflation fears are overblown, the recent ITB correction could be a great buying opportunity," Tschosik said.
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