The real estate sector is a closely-eyed barometer of the broader economic recovery. Despite the market’s challenges of late, these exchange traded funds (ETFs) might still be an opportunity if the sector makes all the right moves.
The broader economic recovery has been tepid, but the real estate sector continues to deliver numbers that surpass expectations:
- Existing home sales in April gave the market its biggest jump in five months. Sales surged 7.6^ thanks to tax credits and low mortgage rates, which are at 50-year lows.
- The surge in home sales helped raise prices, too; the median price of a home rose 4% from a year earlier. Bear in mind, though, that we’re working off some very low prices to begin with as a result of the bubble’s collapse.
- Housing starts increased to a seasonally-adjusted annual rate of 672,000 last month, as new home construction skyrocketed 40.9% in April compared to last year. Julianne Pepitone for CNN Money reports that new construction of single-family homes, the key sector of the housing market, rose 10.2% over the month to an annual rate of 593,000. [Homebuilder ETFs Are Up in April.]
Applications for building permits actually sank in April, but they were up from 2009 numbers. The tax credit may have had a lot to do with the up surge of housing starts in April, however, the expiration of the credit may have builders on the cautious side. [Why Risks Still Abound in Homebuilders.]
For more stories about homebuilders, visit our homebuilders category. There are direct and indirect ways to play real estate. These funds below are all above their 200-day moving averages, though bear in mind that they’ve taken some hits in recent weeks. It’s also worth watching to see how the figures hold up in their first full month without the assistance of tax credits.
- iShares Dow Jones U.S. Consumer Services (NYSEArca: IYC): Home Depot (NYSE: HD), 4.1%; Amazon (NASDAQ: AMZN), 3%; Target (NYSE: TGT), 2.6%; Lowe’s (NYSE: LOW), 2.5%; Time Warner (NYSE: TWX), 2.4%
- Retail HOLDRs Trust (NYSEArca: RTH): Target, 8.4%; Home Depot, 12.8%; Lowe’s, 6.8%; Costco, 4.8% [The Difference Between ETFs and HOLDRs.]
- iShares Dow Jones U.S. Home Construction (NYSEArca: ITB)
- SPDR S&P Homebuilders (NYSEArca: XHB)
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.