Homebuilder exchange traded funds are trying to dig themselves out of a deep hole this year amid several housing data reports this week.
U.S. housing starts fell 5% in August, more than expected, the Commerce Department said Tuesday.
Meanwhile, homebuilder sentiment declined this month — the NAHB/Wells Fargo Housing Market Index dropped from 15 to 14, according to a report Monday. The number has remained between 13 and 16 for six months, while a reading below 50 indicates that sentiment is poor, according to BlackRock. [The Contrarian: A Look at Oversold ETFs]
“Very little has changed in terms of housing market conditions so far this year,” Bob Nielsen, NAHB Chairman said, on Reuters. “Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time.”
Homebuilder ETFs have fallen in 2011 on declining home prices, high unemployment and foreclosures. Also, potential buyers are turned off by tight lending standards and lower homeowner equity.
The ETFs invest in homebuilders and related sectors — for example, home improvement giant Home Depot (NYSE: HD) is a holding.