Rising Home Prices Could Further Strengthen Homebuilder ETFs | ETF Trends

U.S home prices have risen at their fastest past in five months, fueling the ongoing strength in the housing market and homebuilders sector-related exchange traded funds.

Year-to-date, the SPDR S&P Homebuilders ETF (NYSEArca: XHB) increased 41.1%, iShares U.S. Home Construction ETF (NYSEArca: ITB) gained 48.4% and Invesco Dynamic Building & Construction ETF (NYSEArca: PKB) advanced 40.3%.

The S&P CoreLogic Case-Shiller index of property values rose 2.2% from October 2018, posting its third straight acceleration and exceeding economists’ estimates, Bloomberg reports. Prices also beat expectations after rising 0.4% from a month earlier on a seasonally adjusted basis.

Furthermore, a separate report out of the Federal Housing Finance Agency revealed house prices increased 0.2% in October month-over-month, or slightly less than the 0.4% median estimate of economists.

Meanwhile, prices nationwide advanced 5% year-over-year, increasing in all nine regions measured.

The low mortgage rates and strong labor market have helped maintain positive consumer sentiment, attracting potential home buyers and lifting home prices.

“Teamed with a resilient job market, low mortgage rates have helped boost home buyer demand,” Matthew Speakman, an economist at real estate data provider Zillow, told CNBC. “An extreme shortage of for-sale listings, particularly at lower price points, remains a concern and may ultimately result in a sharper re-acceleration in home prices than expected.”

Other data also revealed further stabilization in the housing market, such as an increase in contract signings to purchase previously owned U.S. homes over November for the third time in four months.

“Housing data continue to be reassuring,” Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices, said in a statement. “It is, of course, still too soon to say whether this marks an end to the deceleration or is merely a pause in the longer-term trend.”

However, some were wary of that the housing sector can repeat this year’s outperformance.

“Demand for housing is unlikely to sustain the pace of recent rebound in 2020, as mortgage rates appear to have bottomed out and supply remains thin. Bloomberg Economics expects median home price appreciation for the year ahead to be in the low single digits,” Andrew Husby, a Bloomberg economist, said.

For more information on the housing market, visit our homebuilders category.