Exchange traded funds indexed to homebuilders were dismal performers in the years following the subprime meltdown, but the long-suffering sector is finally beginning to show signs of life. ETFs tracking residential housing stocks are up more than 70% since the October low.

SPDR S&P Homebuilders (NYSEArca: XHB) has rallied 72% since the early October bottom, while iShares Dow Jones US Home Construction (NYSEArca: ITB) has gained 81% from its 52-week low.

The moves reflect improved sentiment on the U.S. housing market. Mortgage rates remain low for now and falling prices means better affordability, although qualifying for a loan is tougher.

“Potential homebuyers and sellers are growing more confident that the U.S. real estate market will begin to recover as soon as next year,” Bloomberg News reported Tuesday.

U.S. pending home sales rose to the highest level in 21 months in January. [Builder ETFs Rally]

Housing sector ETFs are also getting a boost from builder quarterly earnings and improving employment numbers. [Why Homebuilder ETFs are Holding Their Own]

iShares Dow Jones US Home Construction

The opinions and forecasts expressed herein are solely those of John Spence, 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.