How Positive Housing Numbers Are Helping 2 ETFs Break Out
The U.S. homebuilders’ confidence handed the economy positive news this week as sales expectations and buyer traffic improved.
The National Association of Homebuilders (NAHB) Index rose to 58 from 54 in October, beating expectations that called for a slight rise to 55.
The current sales conditions' portion of the number increased five points to 62, futures sales gained two points to 66 and an index gauging prospective buyer traffic added four points to 45.
Highlighted below are two homebuilders ETFs that may be affected by the positive new out of the industry.
iShares Dow Jones US Home Const.
The iShares Dow Jones US Home Const. (ETF) (NYSE: ITB) follows 38 U.S. companies that are in some way involved with the construction of residential homes. The top weighted sectors in the ETF are home construction stocks at 65 percent and building materials and fixtures make up 20 percent.
The top individual holdings include:
- Lennar Corporation (NYSE: LEN) with an 11.1 percent holding
- D.R. Horton, Inc. (NYSE: DHI) making up 11 percent
- PulteGroup, Inc. (NYSE: PHM) coming in at 9.8 percent
ITB is up 1 percent year to date, performing much better of late, up 8 percent over the last six months. It has an expense ratio of 0.43 percent. From a technical perspective, the ETF recently broke above resistance at the $25 area and has been consolidating -- a bullish signal.
SPDR S&P Homebuilders
The SPDR S&P Homebuilders (ETF) (NYSE: XHB) tracks 37 U.S. companies that are involved with the construction of residential homes as well as home improvement. The ETF is distributed across six sectors with homebuilding at 32 percent and building products at 25 percent making up a large portion of the portfolio.
The top holdings, each at 3.5 percent, are:
XHB is down 3 percent year to date and up 4 percent over the last six months. The homebuilder ETF has an expense ratio of 0.35 percent.
The major difference between the two ETFs is the makeup of the portfolios. ITB is heavily weighted toward the homebuilders, while XHB is more diverse with secondary plays on the housing sector.
Despite the most recent positive news, it is important to look at the big picture: The NAHB is not the only indication of health within homebuilders. New home sales in the first nine months of 2014 rose only 1.7 percent from the same period a year prior, according to the Commerce Department. Sales of previously owned homes fell 1.7 percent in September from a year earlier, according to the National Association of Realtors.
The housing recovery still remains slow and it may be a little while longer until it regains its momentum. But the charts are starting to indicate money coming back into the sector, which could be the start of a new leg higher.
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