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Slowing Foreclosure Rate Boosts Homebuilder ETFs


The rate of U.S. home foreclosures plunged sharply over the past year, adding to signs of an improving housing market and supporting homebuilder exchange traded funds.

The SPDR S&P Homebuilders ETF (XHB) gained 2.8% Tuesday and iShares U.S. Home Construction ETF (ITB) rose 3.9%. Year-to-date, XHB increased 10.0% and ITB added 2.4%. [Homebuilder ETFs Strengthen as Sentiment Hits 7-Year High]

According to CoreLogic, over 50,000 foreclosures were completed in May, down 27% year-over-year but up 3.5% from April, reports Ruth Mantell for MarketWatch.

“We continue to see a sharp drop in foreclosures around the country and with it a decrease in the size of the shadow inventory,” Anand Nallathambi, president and CEO of CoreLogic, said in a press release. “Affordability, despite the rise in home prices over the past year, and consumer confidence are big contributors to these positive trends. We are particularly encouraged by the broad- based nature of the housing market recovery so far in 2013.” [Builder ETFs Higher on New Home Sales, House Prices]

Nevertheless, this is still above the monthly average of completed foreclosures prior to the financial crisis – between 2000 and 2006, the monthly average was 21,000.

Additionally, CoreLogic reveals that about 1 million U.S. homes were at some stage of foreclosure in May, down 29% year-over-year and down 3.3% month-over-month.

Florida, though, stood out as the state with the largest foreclosure rate. The state has a foreclosure-inventory rate of 8.8% in May, or over three times the national average.

iShares U.S. Home Construction ETF

For more information on the housing sector, 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.