Homebuilder exchange traded funds have been strong market performers since the October bottom, but some analysts are cautioning investors not to chase the rally.
Lennar (NYSE: LEN - News) shares rose Wednesday after the homebuilder reported lower-than-expected quarterly profit but beat on the top line. The company said revenue rose nearly 11%.
The stock is a holding in iShares DJ US Home Construction (NYSEArca: ITB - News ) and SPDR S&P Homebuilders (NYSEArca: XHB - News ), ETFs that invest in homebuilders and related housing sectors.
Both funds have gained over 10% the past month and have rallied above their 200-day moving averages. They are up nearly 6% over the last week alone.
Yet stepping back, the housing ETFs have languished since the bubble popped in 2007 and remain well below the peak.
The funds are sitting on gains of about 30% over the past three months, but Goldman Sachs recommends investors avoid the sector, The Street reports.
“While the housing sector may be gaining its footing, the improvements are lagging valuations,” according to the report.
“With homebuilding stocks outperforming the market by 3,500 basis points in the last three months, we would wait for a pullback or a clearer picture that housing is healing quicker than it currently is,” said Goldman analyst Joshua Pollard.
SPDR S&P Homebuilders
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