Despite the traditionally slow winter months for the housing market, higher pending home sales, on top of the previous day’s new home sales data, are fueling a strong two-day run in homebuilder exchange traded funds.
The iShares DJ US Home Construction (NYSEArca: ITB) added 0.5% and SPDR S&P Homebuilders ETF (NYSEArca: XHB) increased 1.8% Wednesday after both rose 3% Tuesday on the S&P/Case-Shiller index of home prices and new home sales numbers. [Homebuilder ETFs Cheer New Home Sales, Housing Prices]
On Wednesday, the National Association of Realtors revealed that pending home sales in January rose 4.5% month-over-month, beating expectations of a 1.8% gain, reports Diana Olick for CNBC.
“Over the near term, rising contract activity means higher home sales, but total sales for the year are expected to rise less than in 2012, while home prices are projected to rise more strongly because of inventory shortages,” Lawrence Yun, chief economist for the Realtors, said.
The existing home market is seeing lower supply after almost half of home sales last year were related to distressed properties. Meanwhile, banks have been holding back on foreclosed homes, waiting on higher prices. So far, the so-called Shadow Supply has not flooded the market.
According to the S&P/Case-Shiller index, prices are rising, up almost 7% in December year-over-year across the country’s twenty largest real estate markets.
iShares DJ US Home Construction
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Max Chen contributed to this article.