Economists may not necessarily be calling the strides the housing market has made in the last year a recovery, but that’s not stopping bullish homebuilders or the related exchange traded funds (ETFs) from being optimistic. But the litmus test will come this Friday after tax incentives expire.
Home prices rose 0.6% in February, their first annual gain since the end of 2006. The tax credit is seen as the source of most of the strength. Once that expires at the end of this week, analysts expect more weakness in the market to persist.
But that’s not bumming out the builders any. Around the country, homebuilders are spending millions in a battle to acquire land lots in preparation for ramping up home construction. While volume is tough to track, analysts report that land deals have been rising rapidly in recent months, says Dawn Wotopka for The Wall Street Journal. Some land prices in weak housing areas have risen to new highs not seen since 2006 lows. [Real Estate ETFs: Sink or Swim?]
Homebuilders are enjoying a mostly upbeat earnings season. The latest report came from MDC Holdings (NYSE: MDC), which expressed optimism about rising order, although it saw its first-quarter losses narrow less than expected. [5 ETFs Beating the S&P 500.]
Both homebuilder ETFs are up about 28% year-to-date, an impressive turnaround for one of the most beat-up sectors of the downturn. Now what?
For more stories about homebuilders, visit our homebuilders category.
- SPDR S&P Homebuilders (NYSEArca: XHB)
- iShares Dow Jones U.S. Home Construction Index Fund (NYSEArca: ITB)
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.