Homebuilders ETFs Make A Comeback, If Only For An Instant

September 06, 2008 at 1:00 am by Tom Lydon

August was an unpredictable month for exchange traded funds (ETFs), as the funds that were from last year’s weakest sectors went through a reversal.

The U.S. dollar regained its strength against other major currencies, and precious metals melted down along with other commodities, reports Trang Ho for Investor’s Business Daily.

The homebuilding sector showed more strength, despite the housing numbers remaining dismal. It was announced on Aug. 25 that existing home sales rose 3.1% in July, while the national median sales price dropped 7.1% from the year before.

SPDR S&P Homebuilders (XHB) was up 12.3%, taking the lead among all of the sectors. iShares Dow Jones US Home Construction (ITB) was up 7% for the month. Year-to-date, they’re up 1.1% and down 8.7%, respectively. XHB has a more retail focus, while ITB holds more homebuilding companies.

Gary Gordon at ETF Expert says we are experiencing a classic case of sector rotation, and that valuations within these sectors will draw investors back at some point.

Total assets in the industry for August rose by $300 million to hit a total of $597 billion, according to early numbers from Barclays. Five new products were launched, taking the total number of ETFs to 815. Another 36 were filed with the Securities and Exchange Commission, bring the total in registration to 559.