ETF Trends
ETF Trends

Home construction-related exchange traded funds could be turning around as the strengthening economy and improving jobs market help lift homebuilder confidence to a six-month high.

The iShares U.S. Home Construction ETF (NYSEArca: ITB) was up 1.4% Wednesday while the SPDR S&P Homebuilders ETF (NYSEArca: XHB) was 1.1% higher. Year-to-date, ITB has dipped 4.2% and XHB dropped 5.2%. [Homebuilders ETF Looks to Build on Recent Gains]

The National Association of Home Builders/Wells Fargo index rose to 53 from 49 in June, compared to economists’ median projections for a 50 reading, reports Victoria Stilwell for Bloomberg. Readings above 50 translate to positive conditions.

The improving labor market, along with higher wages and better consumer sentiment, could bolster the industry.

“An improving job market goes hand-in-hand with a rise in builder confidence,” David Crowe, chief economist at the builders association, said in the article. “As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home.”

Additionally, borrowing rules are loosening and more new buyers are looking around the market.

“We are seeing signs of loosening among the mortgage companies, and in our served markets, we are beginning to see evidence of the re-emergence of the first-time homebuyer,” Chief Executive Officer Jeffrey Mezger said.

Meanwhile, a measure of the six-month sales outlook increased to 64 in July, it highest level since September, from 58 in June. The index of current single-family home sales rose to 57, the best reading since January, from 53.

On Thursday, July 17, market observers will be watching for the new housing starts data. Analysts anticipate builders broke ground on 1.02 million homes at an annualized rat in June, slightly more than the 1 million homes in May. Data for existing and new-home sales will come Tuesday, July 22 and Thursday, July 24, respectively.

iShares U.S. Home Construction ETF

For more information on the homebuilders sector, visit our homebuilders category.