ETF Trends
ETF Trends

For every bit of good news about the real estate sector – home sales are up, homebuilders are feeling optimistic – there’s a corresponding piece of bad news. That can make trying to figure out the next move of real estate exchange traded funds (ETFs) a little tricky.

As the U.S. economy begins to heal in increments, the prospects for the housing market are generally looking upbeat.

  • Home sales rose sharply last month and claims for jobless benefits fell last week.
  • New home sales surged 27% in March off a record low and beat all expectations.
  • Government  incentives to buy homes remain in place and have been credited with bringing out buyers who may have otherwise waited.

The winding down of incentives will be the real test for the real estate market. Only then will we truly know how healthy the market truly is and how much the tax breaks factored into the issue. [Can the Real Estate Turnaround Stick?]

Sherrod Lymon for The Examiner says not to be fooled by any early signs of a recovery within the housing markets. Currently the market is dominated by foreclosure listings, which drive down the prices for standard sales in the same area. Right now, banks have only listed about 30% of the properties they actually own and are keeping the rest of their inventory out of the market in order to keep prices stable. [Comparing the Two Homebuilder ETFs.]

If you’re wanting to play real estate using ETFs, be aware of the trend lines and have an exit strategy in place. Year-to-date, both homebuilder ETFs have been stellar, gaining about 27%. But can they keep it up once the safety net is removed? Stay tuned for the answer to that one. [How to Follow Trends.]

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.