Related: Hurricane Season Could Help Bolster Sector ETFs

Federal Reserve policy could also impact ITB and XHB. In a higher rate environment, home affordability is diminished and there is less incentive for renters to purchase a new home. Additionally, the more expensive mortgage rates may scare away current homeowners who are thinking about upgrading to a bigger, more expensive home.

“I will also caution against dismissing the notion of price memory (in the form of resistance) stemming from the 2005 highs. Non-technicians and chartists may scoff at the possibility, but such major junctures on a chart can have a significant impact, even a dozen or more years later. Consider that the Nasdaq first encountered its 2000 highs in mid-2015. It took a full year and a half — and a bumpy one at that — before the index was able to sustain a move to new highs,” reports ETF Daily News.

Traders looking for a bearish play on homebuilders stocks can consider the Direxion Daily Homebuilders & Supplies 3x Bear Shares (NYSEArca: CLAW), which attempts to deliver triple the daily performance of the index XHB tracks.

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