The SPDR S&P Homebuilders ETF (NYSEArca: XHB) is up just over 1% in the past month after showing signs of a breakout in February.

Trading in the $33 to $34 area for much of the past month, XHB resides around multi-year highs, but the $2 billion ETF is a noteworthy member of a group of funds that, despite a strong bull market for U.S. stocks in recent years, have come nowhere close to recapturing pre-financial crisis highs. [These ETFs Aren’t All the Way Back]

Although Lennar (NYSE: LEN), XHB’s sixth-largest holding at a weight of 3.43%, delivered solid quarterly results before the opening bell Thursday, XHB is trading slightly lower after the National Association of Realtors said existing home sales dipped 0.4% last month.

Some analysts see a cautionary tale for XHB as shares of homebuilders now look richly valued, reports Victor Reklaitis for MarketWatch.

XHB is an equal-weight ETF and while it does hold shares of homebuilders, it also mixes in derivatives plays like USG (NYSE: USG), Lumber Liquidators (NYSE: LL), Whirlpool (NYSE: WHR) and Pier One (NYSE: PIR). That provides the ETF some exposure to the retail side of residential real estate, making the fund a discretionary play as well. http://www.etftrends.com/2014/01/a-tale-of-two-homebuilder-etfs/

Should shares of homebuilders enter a prolonged run of weakness, XHB would be vulnerable, but the iShares U.S. Home Construction ETF (NYSEArca: ITB) would be even more so.

The $1.6 billion ITB is the purer homebuilders ETF with Dow component Home Depot (NYSE: HD) being the only member of ITB’s top-10 lineup that is not a homebuilder. ITB’s top-10 lineup is 62.6% of the ETF’s weight.

SPDR S&P Homebuilders ETF

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of XHB.

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