Foreclosures Up, Homebuilding and Related ETFs Down | ETF Trends

In the face of bad housing news that could continue to effect exchange traded funds (ETFs), a few people are still managing to see the silver lining.

First, Alex Veiga at the Associated Press reports that home foreclosures in the U.S. jumped 68% in November, compared with the same month in 2006. You’d think it would be a challenge to find the good news in this announcement, but here it is: that is actually a 10% drop from October’s foreclosures. The last time there was a drop for two consecutive months was between August and September, when they fell 8%.

Next, the Commerce Department reported that new-home construction dropped to its lowest level in 14 years. According to Prashant Gopal of BusinessWeek, David Seiders, the chief economist at the National Association of Home Builders, is actually pleased at the news. How’s that? This puts them on a path to reducing their inventory of unsold homes, he says. To keep building while unsold homes just sit there wouldn’t have been wise.

Overall, while some are putting a positive spin on the numbers and there are occasional glimmers of hope of a turnaround, the fact remains that the housing market is still slumping. Single-family home starts fell 5.4% in October. Building permits fell 24.6% from November 2006. The supply of new homes dropped to 8.5 months — the time it would take to get rid of existing inventories. It was at 9 months in September.

All this news means that real estate and homebuilder-related ETFs might remain down for the time being, as well:

  • SPDR S&P Homebuilders (XHB), down 49.2% year to date
  • iShares Dow Jones US Real Estate (IYR), down 21.3% year to date


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.