ETF Trends
ETF Trends

Exchange traded funds indexed to homebuilders and housing-related stocks rallied on Thursday after the National Association of Realtors said U.S. pending home sales rose 7.3% in November.

Pending home sales climbed to their highest level in 19 months.

“Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high,” said Lawrence Yun, NAR chief economist. “Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage.”

Last week, the realtors group downwardly revised existing home sales and inventory data for the period between 2007 and 2010 by 14%. [Homebuilder ETFs Get a Revision]

The Case-Shiller home price index estimated that U.S. home prices declined by 1.2% in October from the previous month, according to a report released Tuesday. Year over year, home values fell 3.4%.

The rise in pending home sales in November was greater than expected.

“It looks like buyers are becoming more confident and are attracted to record-low mortgage rates,” said Aaron Smith, a senior economist at Moody’s Analytics, in a Bloomberg report. Yet activity “still looks depressed by historical standards,” he added.

SPDR S&P Homebuilders ETF (NYSEArca: XHB) and iShares Dow Jones U.S Home Construction Index Fund (NYSEArca: ITB) rose about 3% on Thursday. They were in negative territory for the year heading into the day’s trading on weak housing data.

iShares Dow Jones U.S Home Construction Index Fund

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