Homebuilders Recovery Select Portfolio, 34

Prior to the rise in mortgage rates, there was substantial demand for new housing. Although the availability of existing homes is currently sitting near historical lows and construction has slowed, many homeowners are hesitant to sell and give up their low mortgage rates, so many prospective buyers will need new builds. In addition, millennials—now the largest generation in the U.S.— have begun to enter the housing market which may have the potential to evolve into a demographic tailwind for new home sales in the foreseeable future. When the Federal Reserve eventually begins to cut interest rates, mortgage rates should trend lower, helping to put a floor under housing later in 2024.

Consider The Following

• According to the U.S. Census Bureau, the U.S. homeownership rate held fairly steady at 65.6% for the second quarter of 2024, compared to 65.8% at the end of 2020. The rate has averaged 66% over the last 20 years and reached its peak in 2004 with 69.2% of households occupied by owners.


• Builder confidence for newly built, single-family homes posted a confidence level of 39 in August 2024. For comparison, a high of 90 was posted in November 2020 and the low of 8 was reached to start 2009.¹


• As of July 2024, permits for single-family homes are down 1.6% compared to a year ago. However, builders have been focusing on projects already in progress. Completions are up 13.8% in the past year and stand near the highest pace seen since 2007.²

Portfolio Objective

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

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.

Risk Considerations
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.

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.

Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East 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.