Homebuilder confidence is at a near-decade high, revealing a strengthening outlook for the housing market and sector-related exchange traded fund.
Year-to-date, the SPDR S&P Homebuilders ETF (NYSEArca: XHB) gained 12.0%, iShares U.S. Home Construction ETF (NYSEArca: ITB) rose 11.1% and PowerShares Dynamic Building & Construction Portfolio (NYSEArca: PKB) increased 15.9%. [Overlooked Homebuilders ETF on the Cusp of an Epic Move]
The homebuilder market has been growing on an improved economy, rebounding housing market and rising confidence in the sector. The National Association of Home Builders revealed that builder confidence in the market for new single-family homes rose to a seasonally adjusted 61 in August, its highest level since November 2005, reports Anna Louie Sussman for the Wall Street Journal. Readings above 50 reflect positive conditions.
The index of builder confidence hovered above 60 in July and June, and it has remained positive for the past year.
“The fact the builder confidence has been in the low 60s for three straight months shows that single-family housing is making slow but steady progress,” NAHB Chairman Tom Woods told the WSJ.
The positive reading is adds to a number of promising indicators in recent months. For instance, the National Association of Realtors said sales of existing homes in June surged to their highest since February 2007. [Home Sales Hit Eight-Year High, Boost Homebuilders ETFs]
”The overall message from the survey…is very upbeat,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told the WSJ. “We see nothing here to change our view that a real recovery in the housing market is finally under way.”
Market observers will have to wait until August 20 for the July existing -home sales figure and watch for the new-home sales data on August 25.
Supporting the growing housing market, many have financed their homes on cheap mortgage rates in a low interest-rate environment. However, some market observers expect the Federal Reserve to hike interest rates as early as September.
Additionally, the expanding economy has helped improve the labor market, which has added an averaged 235,000 jobs per month over the past three months, with unemployment now at 5.3%, its lowest level in over seven years.
The rising rents across the country have also pushed some renters into new home purchases as well.
SPDR S&P Homebuilders ETF
For more information on the housing market, visit our homebuilders category.
Max Chen contributed to this article.