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Builder ETFs in Focus on New, Existing Home Sales


Existing home sales on Wednesday, and new home sales and the FHFA Home Price Index on Thursday should all confirm the improvement in U.S. housing. To capture any upside in recovering housing market, investors can take a look at homebuilder exchange traded funds.

The SPDR S&P Homebuilders (XHB) is up 22.0% year-to-date and iShares U.S. Home Construction ETF (ITB) is up 22.9%.

Homebuilders have been strengthening as new permit data points to increased momentum. [Housing Starts Decline Snaps Homebuilder ETF’s 10-Day Streak]

According to Bloomberg data, existing home sales for March was 0.6% lower from February. However, the drop followed gains of 0.8% in January and 0.2% in February, and sales were still 10.3% higher year-over-year. [Housing Starts Decline Snaps Homebuilder ETF’s 10-Day Streak]

On the supply side, there was enough inventory for 4.7 months, compared to the March 2012 supply of 6.2 months. Observers have attributed to the dip in supplies to a greatly reduced pool of distressed properties.

Consensus forecasts put existing home sales up to 5.0 million, compared to the 4.92 million for March.

New home sales increased 1.5% in March after an unusually weak February – February new home sales fell 7.6%. Observers pointed to the low supply as a result of tight credit and supply chain constraints in the sector. The market is looking for new home sales of at least 430,000, compared to the previous month’s 417,000.

The FHFA Home Price Index is based on single-family housing data provided by Fannie Mae and Freddie Mac. The index for February improved 0.7% after a 0.6% gain in January. Year-over-year, the index increased 7.1% in February.

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

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.