Hoya Capital lowers fee on US housing sector ETF

Aug 7th, 2020 | By | Category: Equities

Hoya Capital has reduced the expense ratio for the Hoya Capital Housing ETF (HOMZ US) from 0.45% to 0.30%, making it the cheapest ETF to target the US housing sector.

Hoya Capital lowers fee on US housing sector ETF

The US housing sector has rebounded strongly from the initial market sell-off in March.

Listed on NYSE Arca, the fund is linked to the proprietary Hoya Capital Housing 100 Index which consists of 100 US-listed stocks with significant business operations in one of four housing segments.

The segments are homeownership and rental operations; home building and construction; home improvement and furnishings; and home financing, technology, and services.

The weight of each segment is allocated based on an approximation of its relative contribution to US Gross Domestic Product.

Companies are allocated to sub-themes within each segment, based on the primary source of firm revenues, and equally weighted within that theme.

Stocks linked to US housing sector activity experienced a greater-than-average decline during the Covid-19 market sell-off with HOMZ dropping 48.5% between 20 February and 23 March compared to a 33.5% fall for the S&P 500 over the same period.

Investors initially believed that the pandemic’s impact on the economy would cause significant long-term disruption to the housing market, a perception that was backed up by March statistics showing a massive drop in sales.

This view has since been revisited after data showing that weak housing sales were primarily a function of a lack of mobility caused by government lockdown orders. The re-opening of the economy has led to a resumption in housing activity and, consequently, rising home prices.

The ETF has subsequently snapped back with HOMZ now up 1.0% year-to-date compared to 4.1% for the S&P 500.

According to Alex Pettee, President and Director of Research at Hoya Capital, the US housing industry shows resilient strength and will be powered by several long-term tailwinds including favorable millennial-led demographic trends, historically low housing supply, near-record low mortgage rates, and the early signs of a post-pandemic suburban revival.

“With the US housing industry emerging as the early leader of the post-pandemic economic recovery, this fee reduction makes exposure to the critical US housing industry cheaper and more accessible than ever,” said Pettee.

There are currently three other US-listed ETFs targeting the local housing industry. The largest of these are the $1.9bn iShares US Home Construction ETF (ITB US) and the $1.0bn SPDR S&P Homebuilders ETF (XHB US) which come with expense ratios of 0.42% and 0.35% respectively and both focus on firms operating in the home construction sector.

While HOMZ is the cheapest, it is also the newest, having launched in March 2019, and the smallest of the four US housing ETFs with $30m in AUM.

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