Homebuilders Recovery Select Portfolio, 31
While demand for new homes has softened since 2021, new home construction ramped up in
2022 to help boost depleted inventory levels (see charts below). In addition, home prices are
beginning to moderate throughout the nation to better align with the higher costs associated
with mortgage loans. Prior to the rise in mortgage rates, there was substantial demand for new
housing. Millennials—now the largest generation in the U.S.—have begun to enter the housing
market in force which may have the potential to evolve into a demographic tailwind for new
home sales in the foreseeable future.
Consider The Following
According to the U.S. Census Bureau, the U.S. homeownership rate rose slightly in 2022 to
65.9%, posting its highest yearly figure since 2011. The rate reached its peak in 2004 with
69.2% of households occupied by owners.
Builder confidence for newly built, single-family homes may be on an upward trend as the
confidence level reached 50 in May 2023, increasing over the last five months and up from 31
at the end of 2022. For comparison, the record low of 8 was reached to start 2009.1
Homebuilders may be taking advantage of lower existing home inventory as the sales pace of
new single-family homes rose 11.8% from April 2022 to April 2023.2
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.
1 NAHB/Wells Fargo National Housing Market Index (HMI). The index gauges expectations for future sales and any number over 50 indicates the more builders view conditions as good than poor.
2 U.S. Census Bureau and the U.S. Department of Housing and Urban Development
|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 professional
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 discretionary and industrials sectors which involve additional risks, including limited diversification. The companies engaged in the consumer
discretionary sector 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.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. 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.
Large capitalization companies may grow at a slower rate than the overall market.
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.
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future variants of the disease.
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.