Builder ETFs Rally 30% Despite Plunging Homeownership Rate
May 1st, 2012 at 9:42am by John Spence
Exchange traded funds that invest in U.S. homebuilder stocks have easily doubled the return of the S&P 500 in 2012 even though the homeownership rate has dropped to the lowest level in over a decade.
The sector ETFs are getting a boost from upbeat homebuilder earnings and signs of improvement in housing data. For example, pending home sales rose about 4% in March to the highest level in about two years. [Builder ETFs Jump on Home Sales]
Still, most economists aren’t looking for a V-shaped recovery in the housing market, but rather a “prolonged bottom,” according to a recent WSJ.com article.
“The good news is that housing construction and home sales appear to have hit a floor,” the newspaper reported. “The problem, of course, is that foreclosures are still a very high share of sales in many of the hardest-hit markets.”
Also, the homeownership rate fell to 65.4% in the first quarter, the lowest level since 1997, Bloomberg News reports.
“Although house prices and mortgage rates have fallen to a level that makes buying preferable to renting, ongoing problems accessing mortgage credit are preventing many households from taking advantage,” said Paul Diggle, property economist with Capital Economics, in the story.
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