Homebuilder ETFs were climbing on high trading volume Tuesday after an index of industry confidence revealed sentiment rose to its highest level since May 2007.
The National Association of Home Builders/Wells Fargo Housing Market Index rose to 29 in May from 24 the previous month, more than economists had expected.
SPDR S&P Homebuilders ETF (NYSEArca: XHB) and iShares Dow Jones US Home Construction (NYSEArca: ITB) gained about 2% in morning trade.
XHB was up 23.7% year to date as of May 14, compared with a 7.4% rise for iShares S&P 500 (NYSEArca: IVV), according to Morningstar.
Builder ETFs are outperforming the market on hopes a turnaround in the U.S. housing market will help the beaten-down sector.
“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” said Barry Rutenberg, NAHB chairman, in Tuesday’s index release. “It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.”
“While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back,” added NAHB Chief Economist David Crowe.
The sentiment reading, though the best since May 2007, is still well short of the 50 level that indicates that more builders view conditions as good than poor, MarketWatch reported.
XHB, the builder ETF, has survived several tests of its 50-day simple moving average since late 2011.
SPDR S&P Homebuilders ETF
