The SPDR S&P Homebuilders (NYSEArca: XHB) is up 45.1% year-to-date and the iShares DJ U.S. Home Construction (NYSEArca: ITB) has gained 62.7% year-to-date.
Recently, some options traders have been buying put contracts on homebuilder ETFs, which means they’re hedging or speculating the sector will cool off after this year’s huge rally. ITB and XHB both pulled back about 4% over the past week. [Bears, Hedgers Buy Puts on Homebuilder Index ETF]
From a technical perspective, Kimble Charting Solutions notes the Dow Jones US Home Construction Index is dealing with rising channel resistance. Also, relative momentum is the highest since the housing bust, suggesting the builder ETFs may need to cool off a bit in the near term.
Some investors use homebuilder ETFs as one tool to monitor the health of the housing market, which is an important missing link in the economic recovery.
iShares DJ U.S. Home Construction
For more information on the home construction sector, visit our homebuilders category.
Max Chen contributed to this article.