Builder ETFs in Focus on Toll Brothers Earnings, Housing Data

December 5th at 7:53am by Tom Lydon

Homebuilder ETFs have been strong performers this year but have stalled out recently near their 2012 highs. Bulls are hoping upbeat earnings from sector bellwether Toll Brothers (NYSE: TOL) and more solid housing data can drive the next leg of the rally.

“Many commentators have credited Ben Bernanke’s third round of quantitative easing (QE 3) with the rebound in the housing market and home builder ETFs, because the Fed’s purchases of mortgage-backed securities has made financing easier,” Wall Street Sector Selector reported. [ETF Chart of the Day: Home Construction]

The National Association of Home Builders (NAHB) published its Homebuilder Confidence Index which last July reached its highest point since March of 2007 and, since that time, the housing market has been steadily improving. November has followed up with more positive data that confirms the trend. The Commerce Department reported a 0.6% increase in spending for the September Construction Report and the National Association of Homebuilders reported the November confidence index rose to 46, the highest level since 2007. [5 ETF Sectors to Watch After Hurricane Sandy]

On November 29, the National Association of Realtors reported the most enthusiastic piece of proof that a recovery is in the making. The Pending Home Sales Index was expected to rise 1% but jumped 5.2% for October, the highest level in 5 years.

The SPDR Homebuilders (NYSEArca: XHB) is up 76.9% so far this year, and has been the second-best performing ETF in 2012. It comes in second to the Dow Jones US Home Construction Index (NYSEArca: ITB) which has gained 99.8% in 2012. ITB has outperformed other homebuilder funds by a long shot over the year and has managed to beat the odds during the possibility of another recession in the U.S, reports Michael Johnston for ETF Daily News. The fact that these two ETFs have beat out others is some solid proof the housing market is making a strong comeback. [Homebuilder ETFs Try Another Breakout After Housing Data]

Earlier this week, CoreLogic said U.S. home prices slipped fractionally in October. “U.S. home prices edged lower in October, even as the year-on-year change registered the strongest advance in more than six years,” MarketWatch reported.

Dow Jones US Home Construction Index

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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