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.
On Wednesday, shares of “Home Depot Inc. (NYSE: HD) and Lowe’s Cos. (NYSE: LOW) rallied 2.3 percent and 3.2 percent respectively as hurricane Joaquin’s path came closer to threatening the East Coast. That’s the home improvement retailers’ largest gain in as much as month. Generac Holdings Inc., a portable generator maker, surged 10 percent, its best performance since since February 2014,” according to Bloomberg.
XHB, the homebuilders ETF that tilts more toward the discretionary side of residential real estate, features Home Depot and Lowe’s as its second- and third-largest holdings at a combined weight of 7.7%.
“Joaquin, a Category 1 storm with 85 miles-per-hour winds, is forecast to cross the Bahamas Thursday. If it heads towards the U.S. next, it could cause damage that shores up business for building material producers like Owens Corning (NYSE: OC). That possibility pushed the company’s shares up 4.5 percent Wednesday, its biggest gain since July, tacking on $220 million in market value,” reports Bloomberg.
SPDR S&P Homebuilders ETF
