The SPDR S&P Homebuilders ETF (NYSEArca: XHB) and the iShares U.S. Home Construction ETF (NYSEArca: ITB), the two largest exchange traded funds tracking homebuilders stocks and related fare, have outperformed the S&P 500 this year, posting modest gains while the benchmark U.S. index has slumped.

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]

With supportive data, another near-term catalyst looms for homebuilders ETFs: Mother Nature.

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