Homebuilding exchange traded funds (ETFs) are at a crossroads. On the one side is an improving housing market, but on the other is an expiring tax credit and a still-heavy rate of foreclosure activity.

Although the U.S. economy is healing in increments, homebuilders are still feeling upbeat about their prospects. Jann Swansen for Mortgage Daily News reports that the National Association of Homebuilders (NAHB) released the results of the Remodeling Market Index and the sentiment is improving. In fact, the index just notched its best performance since  [How Real Estate ETFs are Coping.]

Despite these pockets of improvement that we’ve seen in recent months, there are still glitches within the economy at large that may keep some from entering this sector, explains Jeffery Miller for iStockAnalyst. [What the Future Holds for Homebuilder ETFs.]

  • The Fed stopped direct investment in mortgages a month ago
  • The $8,000 credit for buyers ended last week
  • The foreclosure rate is still very high

On the other hand, though, several factors are contributing to the appeal of this sector: home ownership is down to 67%, home prices are still on the decline in many areas and the vast majority of mortgages are backed by the government.

For more stories about homebuilders, visit our homebuilders category.

  • SPDR S&P Homebuilders (NYSEArca: XHB)

  • iShares Dow Jones U.S. Home Construction (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.