What Is the PHLX Housing Sector Index (HGX)?
The Philadelphia Stock Industry (PHLX) Housing Sector Index (HGX) tracks housing development companies working immediately inside the U.S. building market. Multiple companies inside the building and prefabrication of residential houses, mortgage insurers, and suppliers of constructing materials make up the index. The index trades on the Nasdaq.
Key Takeaways
- The Philadelphia Stock Industry (PHLX) Housing Sector Index (HGX) tracks housing development companies inside the U.S. building market.
- HGX began purchasing and promoting in July 2002 with an initial worth of 250.
- Purchasing and promoting on the Nasdaq, the index calculates its worth the use of the cost return index and the entire return index.
- Underlying phase companies include Armstrong World Industries, M.D.C. Holdings, and Weyerhaeuser Company.
- Recalculation of the index occurs during the purchasing and promoting day and the index is rebalanced each and every quarter.
Working out the PHLX Housing Sector Index (HGX)
The initial worth of HGX used to be as soon as 250 in July 2022. The HGX professional a two-for-one get a divorce in February 2006. At {the marketplace}’s ultimate on June 30, 2011, the entire return index (XHGX) used to be as soon as synchronized to test the cost of the cost return index (HGX).
Historically, if area prices are rising, builders commit further building contracts, main to bigger profits for area builders and a spike in their portion of the index.
Elements that affect the housing market, harking back to changes in lumber prices, regularly lead to corresponding changes inside the index.
The PHLX Housing Sector Index (HGX) makes use of 2 how you can calculate its worth. The ones two methods are the price return index (Nasdaq: HGX) and the entire return index (Nasdaq: XHGX).
The calculation of the cost return index does no longer include the cost of cash dividends on Index Securities. Conversely, the entire return index consists of the reinvestment of cash dividends, on the ex-dates, in its figures.
Components of the PHLX Housing Sector Index (HGX)
The Nasdaq lists many prerequisites for the development of the PHLX HGX. The index is a modified market capitalization-weighted index. Weighting indicates the underlying portions have adjustments in line with the entire worth of all outstanding shares of that company.
As the cost of the outstanding shares changes as a result of daily market activity, the weighting of that phase inside the index may additionally trade. Recalculation of the index occurs during the purchasing and promoting day, and its worth updates each and every second.
Throughout the case where an underlying phase halts purchasing and promoting on its listed market, the index will use the “final safe price” for the security in its calculations. Further, no one stock could have more than a 15% weight, and the index will rebalance each quarter.
Probably the most easiest underlying portions of the PHLX HGX, along with the purchasing and promoting ticker symbol of each company, are:
- Armstrong World Industries (AWI)
- Vulcan Materials Company (VMC)
- Weyerhaeuser Company (WY)
- PennyMac Financial Services and products, Inc. (PFSI)
- M.D.C. Holdings, Inc. (M.D.C)
- Lennox World Inc. (LIL)Â
- LGI Homes, Inc. (LGIH)
- Mueller Water Products, Inc. (MWA)
- M/I Homes, Inc. (MHO)
- D.R. Horton, Inc. (DHI)
Example
Many events impact the cost of the PHLX HGX, in particular the interest rate. When the Federal Reserve initiated 3 interest rate hikes during 2018 and projected various further hikes during 2019, this higher-rate advertising and marketing marketing campaign pushed 30-year mortgage fees to multi-year highs.
Because of this, new area product sales plummetted, falling for two consecutive months in June and July, which may also be traditionally robust product sales months. In 2018, the HGX dropped 42% by the use of year-end from its January highs.
In every single place the COVID-19 pandemic in 2020, the index spotted a build up for the reason that housing market grew after a prolonged period of decline. The price of the index in the summer of 2021 used to be as soon as more than the cost quicker than the pandemic began in March 2020.
Thru mid-2022, the Federal Reserve Board began raising interest rates and the index dropped since worth will build up regularly signal upcoming downturns inside the housing market. The index fell from 528.8 on Jan. 3, 2022 to 355.8 on June 29, 2022, representing a 32.7% decline.
