Homebuilders exchange traded funds jumped Wednesday as the housing market recovery picks up the pace with U.S. sales at an eight-year high.
On Wednesday, the SPDR S&P Homebuilders ETF (NYSEArca: XHB) was up 1.9%% and iShares U.S. Home Construction ETF (NYSEArca: ITB) was 2.1% higher. Year-to-date, XHB rose 7.1% and ITB gained 6.1%.
The housing sector was strengthening Wednesday after the National Association of Realtors revealed sales of previously owned homes in June increased 3.2% to a 5.49 million annualized rate, the strongest since February 2007, reports Victoria Stilwell for Bloomberg.
“The market is tighter compared to last year,” Lawrence Yun, NAR chief economist, said at a news conference. “Home values are rising too fast and we need more supply to bring the price growth down, consistent with income growth.”
Low inventory levels have pushed prices to an all-time high, and listed properties are on average only listed for just 34 days, the quickest turnover in four years of record-keeping.
Consequently, the dearth in available inventory and rising home prices may spur homebuilders to step up construction. So far, housing starts have increased 9.8% to 1.17 million annualized rate, the second-highest level since November 2007.
Supporting the rebound in the housing market, an improved job market and recovery in home values have helped more Americans move around and take advantage of the historically low interest rates.
The Mortgage Bankers Association said seasonally adjusted index of mortgage application activity rose 0.1% in the week ended July 17, Reuters reports.
“The rise in existing home sales to their highest level since before the financial crisis provides further evidence that the housing recovery has shifted into a higher gear,” Andrew Hunter, an associate economist in London for Capital Economics, said.
The ProShares Ultra Homebuilders & Supplies (NYSEArca: HBU) and the ProShares UltraShort Homebuilders & Supplies (NYSEArca: HBZ) will offer double leverage long and inverse performance of the Dow Jones U.S. Select Home Construction Index, the underlying benchmark for ITB. However, potential investors should be aware that the funds are relatively new and show low trading activity, so use limit orders to better control trades.
iShares U.S. Home Construction ETF
For more information on the housing market, visit our homebuilders category.
Max Chen contributed to this article.