Homebuilders Recovery Select Portfolio, 23
The housing bubble popped in 2008 as banks issued mortgages to many borrowers with questionable credit, which in many cases has led to defaults and foreclosures. Lenders today take a much
closer look at borrowers’ income history and their overall debt situation before approving a mortgage loan.
Since December 2008, the Federal Reserve has kept interest rates very low in an effort to make capital more readily available. The federal funds rate is the central bank’s key to stimulate the
economy and a low rate is believed to encourage spending by making it cheaper to borrow money. We believe that the current low interest rate environment may provide a stimulus for consumers
looking to purchase a home.
The objective of this unit investment trust is to seek above-average capital
appreciation by investing in the common stocks of companies involved in the home
building industry; however, there is no assurance the objective will be met.
Consider These Factors
- Home prices nationwide, including distressed sales, increased 4.0% in January 2020 compared
to January 2019. This marks eight years of annual home price appreciation. Home prices are
anticipated to rise 5.4% from January 2020 to January 2021.1
- The homeownership rate increased to 65.1% in the fourth quarter of 2019, the highest in six
years. In addition, the U.S. rental vacancy rates dropped to 6.4%, the lowest since mid-1985.2
- • As of December 2019, the national foreclosure inventory rate was 0.4%, unchanged from a
year earlier. Rising home prices have led to record amounts of home equity, reducing the risk
- Builder confidence in the market for newly built, single-family homes stood at a level of 74
in February 2020.* Confidence levels have been above 50 for 68 consecutive months, which
is consistent with a modest and ongoing recovery, according to the National Association of
Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
*The index gauges expectations for future sales. Any number over 50 indicates that more builders view conditions as
good than poor.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial advisor
or call First Trust Portfolios L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with owning common stocks, such as an economic recession and the
possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.
You should be aware that the portfolio is concentrated in stocks in both the consumer products and industrials sectors which involves additional risks, including limited diversification. The companies engaged in the consumer
products industry are subject to global competition, changing government regulations and trade policies, currency fluctuations, and the financial and political risks inherent in producing products for foreign markets. The
companies engaged in the construction industry are subject to competition, overcapacity, labor relations, a reduction in consumer spending, changing consumer spending habits, unseasonable weather conditions, and severe
fluctuations in the price of basic building materials. The companies engaged in the industrials sector are subject to certain risks, including a deterioration in the general state of the economy, intense competition, domestic and
international politics, excess capacity and changing spending trends.
One of the securities in the portfolio is issued by a foreign entity. An investment in a portfolio containing equity securities of foreign issuers is subject to additional risks, including currency fluctuations, political risks,
withholding, the lack of adequate financial information, and exchange control restrictions impacting foreign issuers.
An investment in a portfolio containing small-cap and mid-cap companies is subject to additional risks, as the share prices of small-cap companies and certain mid-cap companies are often more volatile than those of larger
companies due to several factors, including limited trading volumes, products, financial resources, management inexperience and less publicly available information.
As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.
Local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public
health issues, recessions, or other events could have a significant negative impact on the portfolio and its
investments. Such events may affect certain geographic regions, countries, sectors and industries more
significantly than others. The recent outbreak of a respiratory disease designated as COVID-19 was first
detected in China in December 2019. The global economic impact of the COVID-19 outbreak is impossible
to predict but is expected to disrupt manufacturing, supply chains and sales in affected areas, negatively
impact global economic growth prospects, and could result in a substantial economic downturn or recession.
The value of the securities held by the trust
may be subject to steep declines or increased
volatility due to changes in performance or
perception of the issuers.
This UIT is a buy and hold strategy and
investors should consider their ability to hold
the trust until maturity. There may be tax
consequences unless units are purchased in an
IRA or other qualified plan.