Homebuilders exchange traded funds are among this year’s most downtrodden industry funds. The SPDR S&P Homebuilders ETF (NYSEArca: XHB) is down more than 23% year-to-date, but some traders have recently scooping up shares of the equal-weight homebuilders fund.
Some recent encouraging data points facilitated a rally in homebuilder ETFs. Over the past week, XHB is up more than 4%. Supporting the gains in the homebuilder sector, the Census Bureau revealed the homeownership rate was 64.4% in the third quarter, compared to 64.3% in the prior three months and 63.9% a year earlier, Bloomberg reports.
XHB “took in $111 million Tuesday, its largest inflow since 2014,” reports Bloomberg. “Investors also traded $437 million worth of the fund’s stock on the day, more than quadruple the average daily volume for the homebuilders ETF in the past year. XHB shares, which are down around 11% this month and 23% this year, rallied 5% during the session.
XHB ETF Details
XHB features significant exposure to consumer discretionary and retail stocks that are tied to the residential real estate trade.
XHB “seeks to provide exposure to the homebuilders segment of the S&P TMI, which comprises the following sub-industries: Building Products, Home Furnishings, Home Improvement Retail, Homefurnishing Retail, and Household Appliances,” according to the issuer.
“Homebuilders have come under pressure due to rising mortgage rates, a slowdown in demand and housing affordability issues. But a rebound in U.S. pending home sales could help a comeback. Contracts to buy previously owned homes rose for the first time in three months, an indication that the recent market slump could be stabilizing, National Association of Realtors data showed last week,” according to Bloomberg.
Declining prices could allow more buyers to enter the market, which could be a positive for XHB and rival funds.
The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the country, was up 5.8% in the year ended in August, compared to a 6% year-over-year rise reported in July. The measures was also the first time in a year that annual price gain fell below 6%, the Wall Street Journal reports.
Leveraged plays on homebuilder stocks include the bullish Direxion Daily Homebuilders and Supplies Bull and Bear 3X Shares (NYSEArca: NAIL), which attempts to deliver triple the daily returns of the Dow Jones U.S. Select Home Construction Index.
For more information on the housing market, visit our homebuilders category.