Homebuilder ETFs rallied Tuesday following a Commerce Department report that sales of new U.S. homes rose nearly 16% in January to the highest level in over four years.

The iShares DJ US Home Construction (NYSEArca: ITB) and SPDR S&P Homebuilders ETF (NYSEArca: XHB) rose 3.8% and 3%, respectively, in afternoon dealings.

“Steady job creation and near-record-low mortgage rates are spurring more Americans to buy houses,” the Associated Press reported. “At the current sales pace, it would take just 4.1 months to exhaust the number of new homes for sale, the lowest in eight years. Low inventories should encourage more construction.”

Separately, the S&P/Case-Shiller index of home prices increased 6.8% from December 2011, the biggest year-to-year gain since July 2006, Bloomberg reports.

Also Tuesday, shares of Home Depot (NYSE: HD) rallied 5% after the home-improvement retailer reported solid quarterly earnings. The stock comprises over 3% of both homebuilder ETFs.

iShares DJ US Home Construction

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