Homebuilder exchange traded funds were higher in early trading Thursday after the Commerce Department said housing starts climbed 12.1% last month.
New construction rose to the highest level since June 2008, MarketWatch reports.
The iShares DJ US Home Construction (NYSEArca: ITB) and SPDR S&P Homebuilders ETF (NYSEArca: XHB) traded higher in premarket action after the report. The ETFs rose 79.4% and 57.3%, respectively, in 2012, according to Morningstar. Builder stocks have enjoyed a huge rally the past year on hopes the housing market is on the mend after the subprime crash. [Homebuilder ETFs Breaking Out on Budget Deal Optimism]
The National Association of Home Builders/Wells Fargo Housing Market Index released earlier this week revealed builder confidence continues to hold at its highest level since April 2006.
“Conditions in the housing market look much better now than at the beginning of 2012 and an increasing number of housing markets are showing signs of recovery, which should bode well for future home sales later this year,” said Barry Rutenberg, chairman of the NAHB.
Also this week, CoreLogic said U.S. home prices were up 7.4% in November year-over-year. It was the largest annual increase since May 2006.
The recovery is helping homeowners who were underwater on their mortgages. The housing bust resulted in 12 million borrowers in the U.S. who owed more on their mortgages than their houses were worth, blocking them from moving or saving money by taking advantage of the lowest borrowing costs on record to refinance, Bloomberg News reports.
“It supports household wealth, consumer confidence and can generate greater credit creation,” Bank of America senior economist Michelle Meyer said in the report. “If prices are rising, homeowners believe that they will once again have an appreciating asset. It’s a very big change in how they think about their wealth and their balance sheets.”
iShares DJ 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.