Published August 23, 2012
Homebuilder exchange-traded funds are trending higher this week as the housing market proves to be a bright spot in the sluggish economic recovery. Strong housing data and better-than-expected quarterly results from Toll Brothers (TOL) is boosting the once-struggling sector.
The 11-member Standard & Poor’s 1500 Homebuilding index climbed 3% as shares of Toll hit a 5-year high this week.
SPDR S&P Homebuilders ETF (XHB), which tracks the performance of the S&P Homebuilders Select Industry Index, is up more than 7% in the past month and 36.1% since January 1. The iShares Dow Jones U.S. Home Construction Index ETF (ITB), the top-performing ETF in the first half of 2012, also posted gains. ITB is up 6.36% in the last month and 50.59% so far this year.
XHB and ITB each have Toll Brothers in their top 10 holdings.
“Recent housing data is consistent with the broader picture that housing is in slow recovery,” said Stan Humphries, Zillow Chief Economist. “Nationally, the housing market has bottomed. Buyers are finally getting off the fence and jumping back into the market.”
Existing U.S. home sales rose in July, up 2.3% to an annual rate of 4.47 million units, the National Association of Realtors said on Wednesday.
Builder confidence continued to improve for a fourth consecutive month in August; the National Association of Home Builders/Wells Fargo Housing Market Index showed builders' confidence for newly built, single-family homes rose to its highest level since February 2007.
With housing on the rebound, lumber exchange-traded funds are getting bump. Guggenheim Lumber (CUT), which tracks the performance of stocks of global timber companies, is up nearly 6% since one month ago.
But not all housing data is trending in the positive direction, and mixed reports are stopping some from getting too excited, too fast.
“It’s a regional story, and while data is improving, I expect housing to trend sideways for a while,” said Chris Whalen, Tangent Capital Markets Senior Managing Director. “Housing is kind of like unemployment -- when the sector does better, more players will enter.”
U.S. housing starts fell 1.1% in July after posting solid gains in June.
The Commerce Department releases July new-home sales data Thursday.