The SPDR S&P Homebuilders ETF (NYSEArca: XHB) and the iShares U.S. Home Construction ETF (NYSEArca: ITB) have been surging to start 2017 and data suggest there are solid fundamentals backing the moves for these homebuilder ETFs.
The equal-weight XHB mixes stocks such as Tempur Sealy (NYSE: TPX), Williams-Sonoma (NYSE: WSM) and Restoration Hardware (NYSE: RH) with pure play homebuilders such as Lennar (NYSE: LEN) and Toll Brothers (NYSE: TOLL) among others. That ETF is higher by about 8.7%.
With ITB being a more pure play on homebuilders equities, that ETF is really soaring with a year-to-date gain of almost 15%.
“A monthly index of builder sentiment jumped six points to the highest level in 12 years. The National Association of Home Builders/Wells Fargo Housing Market index hit 71 in March, a sizable jump from 58 in March of 2016. Anything above 50 is considered positive sentiment,” reports CNBC.
Some investors believe President Trump will follow through on campaign promises to reduce corporate taxes, cut back on regulations and throw billions of dollars into the U.S. economy. However, the expansionary rhetoric has caused the Federal Reserve to tighten its monetary policy, which could push up mortgage rates. Since Election Day, ITB and XHB have been among the hottest “Trump trades.”