The U.S. housing market bubble has been fizzling out, and it’s taking related exchange traded funds (ETFs) down with it. For much of 2007, the industry has been in crisis mode. Mortgage defaults are rising, home prices are stagnant or dropping and the inventory keeps rising. David Kathman for Morningstar reports that the summer’s credit crunch had a ripple effect on the broader market and nobody’s sure when this housing market will hit bottom and how extensive the damage will be. One area that’s been hit particularly hard is the homebuilders and two of the ETFs that focus on this area:

• iShares Dow Jones U.S Homebuilders (ITB) is down 52.6% year-to-date
• SPDR S&P Homebuilders (XHB) is down 42.9% year-to-date

Some of the major stocks in these baskets are Lennar (LEN), D.R. Horton (DRH), Pulte Homes (PHM) and Centex (CTX), which are all down 50% or more year-to-date, and at least 30% for the trailing three months. On the upside, eventually the only way they can go is up.

Tags: Homebuilders, Real Estate