Homebuilder ETFs Rally on Housing Data

September 21st at 3:23pm by Tom Lydon

U.S. homebuilder confidence rose this month to its highest level in six years and analysts expect the housing recovery to strengthen in the next six months. SPDR S&P Homebuilders Index (NYSEArca: XHB) has gained about 30% over the past three months, as sentiment toward the housing market has started to turn more positive.

“There are many reasons to feel good about housing, including data that we saw today,” said Elizabeth Ptacek, real-estate analyst at Cleveland’s KeyBank. “There’s not much positive out there and housing represents a bright spot.” [ETFs and the Presidential Election]

The National Association of Homebuilders/ Wells Fargo builder sentiment index showed a 40% increase in September. This is the highest reading since June of 2006, just before the housing bubble burst, reports Associated Press. Builders also reported seeing the best sales level since July 2006, while turnout by prospective buyers returned to levels not seen since May 2006. [ETFs to Capture a Turnaround in the Housing Market]

Furthermore, sales of newly built homes are up as well as sales of previously occupied homes. Home prices are inching up and inventory of foreclosures and available home supplies are down.

Still, unemployment remains a headwind with the jobless rate at 8.1%. The housing market can not make a full recovery until the jobs market has. [ETF Asset Growth Remains Strong in 2012]

XHB has gained more than 50% year-to-date, reports Cinthia Murphy for Index Universe. Likewise, the iShares Dow Jones U.S. Home Construction Index Fund (NYSEArca: ITB) has gained an impressive 70% year-to-date and has been the year’s top performing ETF so far among unleveraged funds.

“Recent data suggests that home prices are up more than 3% from a year ago and as much as 9% from lows reached this spring,” says Robert Johnson, director of economic analysis with Morningstar. “New housing starts and existing home sales have both had quite a run. In some cases, housing data has been improving for more than six months in a row, suggesting that just maybe we are building a virtuous cycle of momentum in this heretofore left-for-dead sector.”

iShares Dow Jones U.S. Home Construction Index Fund

 

Tisha Guerrero contributed to this article.

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.

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