Homebuilder exchange traded funds were the top-performing sector in the first quarter with a 26% rally on signs of improvement in the housing market, unemployment data and the U.S. economy.
The iShares Dow Jones US Home Construction (NYSEArca: ITB) and SPDR S&P Homebuilders (NYSEArca: XHB) are doubling the return of the S&P 500 so far this year. [Builder ETFs Surge]
“Homebuilding is on the rebound. So one way for investors to play the housing recovery is to buy shares of two ETFs that track home construction and home improvement stocks,” writes Ian Wyatt of Wyatt Investment Research at Seeking Alpha.
The builder ETFs have been consolidating the past two weeks after a strong advance to start the year. [Is the Bottom In for Real Estate ETFs?]
However, some big traders are expressing caution on the outperforming sector this week.
In options markets, XHB bearish puts were purchased “in huge size” on Thursday, according to Street One Financial.
“The sector continues to flirt with new highs, really withstanding weakness in other areas of the equity markets this week and on huge volumes in the underlying ETF. It is possible that a long holder of the ETF is simply locking in gains in case of a potential reversal or this could be outright bearish speculation,” said Paul Weisbruch, head of ETF/options sales and trading at Street One.
SPDR S&P Homebuilders
