Weekly ETF Outlook – Homebuilders: Case-Shiller Prices and Pending Sales

August 26th at 6:00am by John Spence

Homebuilder ETFs are on a tear in 2012 and could see action in the coming week as investors get reports on U.S. housing prices and pending home sales.

The iShares Dow Jones US Home Construction (NYSEArca: ITB) is the best-performing sector ETF with a year-to-date gain of 50%. SPDR S&P Homebuilders (NYSEArca: XHB) is up 36%.

The S&P/Case-Shiller home price index for June will cross on Tuesday. The S&P/Case-Shiller 20-city composite rose 2.2% in May, MarketWatch reported.

Also, markets will get a report on July pending home sales on Wednesday. In June, pending home sales fell 1.4%.

“Buyer interest remains strong but fewer home listings mean fewer contract signing opportunities,” said Lawrence Yun, chief economist at the National Association of Realtors, in the June release.  “We’ve been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers and investors.”

The homebuilder ETFs were little changed last week as luxury builder Toll Brothers (NYSE: TOL) reported strong quarterly earnings.

“We are enjoying the most sustained demand we’ve experienced in over five years,” said Douglas Yearley, chief executive of Toll Brothers. [Builder ETFs Rally on Toll Brothers Earnings]

Last week, the Commerce Department said new home sales rose 3.6% in July to a two-year high.

“The housing market is making a modest but steady recovery in part because homes are more affordable: Mortgage rates have fallen to near-record lows. Housing prices are about one-third lower than at the peak of the housing bubble in 2006. Those trends have helped lift sales of both new and previously occupied homes,” USA Today reports.

“Still, the housing market has a long way to go to reach a full recovery. The pace of home sales remains well below healthy levels. Many people are still having difficulty qualifying for home loans or can’t afford larger down payments required by banks,” the newspaper added.

iShares Dow Jones US Home Construction

The opinions and forecasts expressed herein are solely those of John Spence, 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.

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