Homebuilder exchange traded funds (ETFs) are looking far better than they did just a few months ago, but you can’t exactly say the same for the U.S. housing market.
Sure, there has been a lot of improvement in the market this year.
U.S. housing starts rose to a better-than-expected 3.9% in November year-over-year and starts of single-family homes increased 6.9% from October, writes Joseph Lazzaro for Daily Finance. Permits for single-family homes increased 3% year-over-year. Overall, new home sales rose for the month of November, up 5.5%. Although the numbers are up, the picture is still painting a weak housing market, as sales are up at a slower-than-expected rate, reports Lucia Mutikani for Reuters.
It may be too soon to get overly excited about the numbers – U.S. officials caution that the data has a large margin of error and market analysts warned that it usually takes three to five months for a trend to hold.
Additionally, job creation remains a huge issue and it’s a key factor that has been holding back home sales. It is estimated that 150,000 to 200,000 jobs need to be created on a monthly basis to keep the housing trend alive. [What’s Holding Homebuilder ETFs Back?]
David Stiff, chief economist at Fiserv Case-Shiller, states that five to seven years is a “pretty standard time frame” for prices to come back after a large correction. Fiserv forecasts another 7% drop in U.S. median home prices until the housing market hits bottom by mid-2011. [Homebuilder ETFs Send Mixed Signals.]
Despite the mixed messages coming from the housing sector, SPDR S&P Home Builders ETF (NYSEArca: XHB) and iShares Dow Jones U.S. Home Construction (NYSEArca: ITB) have held up fairly well, gaining about 14% in the last year. But like the housing market, they too have a ways to go – they’re still 55% and 70% off their February 2007 highs.
For more information on the housing market, visit our real estate category.
Max Chen contributed to this article.