Discouraging Signs for Homebuilders ETFs
This article was originally published on ETFTrends.com.
The iShares U.S. Home Construction ETF (ITB) , the largest homebuilder-related exchange traded fund, and the rival SPDR S&P Homebuilders ETF (XHB) were among 2017's most exciting trades.
This year, that trend is reversing in a big way. ITB and XHB are lower by an average of 11.5% and some market observers believe homebuilders equities could face more downside.
“Homebuilders as a group, measured by the U.S. home construction ETF ITB, has sunk over 12 percent this year; that places the group on pace for its worst year since 2008, when it lost 44 percent, and its first negative year since 2011,” reports CNBC.
ITB is more of a pure play on homebuilders stocks whereas XHB is an equal-weight fund that features significant exposure to consumer discretionary and retail stocks that are tied to the residential real estate trade.
Disappointing Data Plaguing ITB and XHB
Rising interest rates and disappointing home sales data are plaguing ETFs like ITB and XHB.
“The recent rise in interest rates has pushed mortgage rates to a seven-year high, and affordability is clearly becoming an in issue. Although shares of Lowe's soared 10 percent on Wednesday following the company's quarterly earnings, it missed Wall Street's forecasts for quarterly same-store sales. This could signal the market is slowing down,” according to CNBC.
The recent losing streak may be attributed to profit-taking in one of the market’s hottest sectors, along with growing concern over rising mortgage rates as yields on benchmark 10-year Treasuries now hover around 3%
“Housing and all of its related services contribute nearly 18 percent of total U.S. gross domestic product, so any slowdown in the sector could reverberate through the whole equity market, especially homebuilders,” reports CNBC.
This year, investors have pulled $972.48 million from ITB as of May 23 rd .
For more information on the housing market, visit our homebuilders category.
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