Homebuilder ETFs Lose Steam, REITs Gain It

July 20th at 12:00pm by Tom Lydon

Homebuilder exchange traded funds (ETFs) seem to have become the market’s punching bags. Confidence is at lows and activity plummeted last month.

A pullback for all housing market measures has been seen in the Housing Market Index, suggesting that the rally in the first part of the year was likely the result of tax credits that expired in April. SoldAtThe Top for the Christian Science Monitor says that the “buyer traffic” index is showing the weakest results, pulling back some 23% since July of 2009 and sitting just 3 points above the lowest level ever recorded.

Jeff Claubaugh for The Washington Post reports that the slowdown in construction comes as the result of two things: a lack of incentive and a glut of existing inventory. Housing starts were lower in June, while building permits showed a monthly gain -  a promising sign for future activity, if nothing else. [Homebuilder Confidence is Down.]

  • SPDR S&P Homebuilders (NYSEArca: XHB)
  • iShares Dow Jones U.S. Home Construction Index Fund (NYSEArca: ITB)

On the brighter side, commercial real estate may be on the the mend as U.S.  commercial real estate prices increased 3.6% in May. This is the second month in a row that prices have increased. However, the good news is offset by low transaction volumes, forecasts for slowing macroeconomic growth and the rising risk of a double-dip recession, says A.D. Pruitt for The Wall Street Journal. [Diversify Your Portfolio with REITs.]

  • SPDR Dow Jones REIT (NYSEArca: RWR)
  • First Trust S&P REIT (NYSEArca: FRI)

For more stories about homebuilders, visit our homebuilders category.

Tisha Guerrero contributed to this category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.