The homebuilder ETFs also hold building-materials and fixtures producers, home-improvement retailers and furniture companies, notes Morningstar analyst Robert Goldsborough. [A Diversified Homebuilders ETF to Capture the Housing Recovery]
Investors should be prepared for a bumpy ride as ITB has been about twice as volatile as the S&P 500 over the past five years.
“The housing industry appears to have turned the corner. In the wake of a steady stream of positive reports, homebuilding companies’ share prices have been on a tear since the start of 2012,” Goldsborough writes in a report on the builder ETF.
“However, despite all this rosy data and mortgage rates remaining at record lows, there are some danger signs that could hamper homebuilders going forward, such as a huge inventory of foreclosed homes on the market at distressed prices,” he added. “Also, lending standards are much tighter than they were a few years ago. Given the still-lousy job market, high housing inventory, and a sea of foreclosures, it’s reasonable for an investor to wonder if homebuilding stocks have gotten ahead of themselves, given their recent rally.”
SPDR S&P Homebuilders
