“ITB has a much higher exposure to homebuilders because of its index construction rules, with homebuilders making up about 62% of its assets. XHB, meanwhile, devotes only about 26% of its assets to homebuilding companies. ITB’s index caps its total weight to non-homebuilding companies at 40%, while XHB’s index tracks a much broader universe,” according to Goldsborough.
While recent data points suggest investors are feeling a bit more sanguine about the interest rate outlook and homebuilders stocks and ETFs in general, that does not imply a “free lunch” type of investment with either ITB or XHB.
For example, homebuilders ETFs and their holdings must contend with declining home ownership, a trend that may not abate anytime soon. American home ownership fell to 64.7% in the second quarter, the lowest level in nearly two decades, due to inflated home prices and the burden of rising student loan debt.
iShares U.S. Home Construction ETF
ETF Trends editorial team contributed to this post.