Homebuilder ETFs In Focus After New Home Sales Data

by on May 24, 2013 | ETFs Mentioned:

Even as U.S. Markets continued to stumble back Thursday morning, still processing the news that Ben Bernanke and the Fed will continue their aggressive buying strategy for now, there was one major force pulling investors back into the green. New home sales from April have improved  for the third month in a row, reaching a three-year high [see S&P 500 Visual History].

U.S. New Home Sales Soar

The US Census Bureau report release on May 23rd was the latest sign that the housing market is on its way back up. This jump is larger than most economists suspected, with the general forecast closer to 426,000 in April. This rise has also led to a rise in price; with the median price for new homes in April up 14.9% from last year to $271,600, it seems clear that sellers know demand is coming back strong [see also Companies Increase Dividends: ETFs To Play]:

With prices and sales reaching new record highs, many analysts are considering these numbers to be the latest in a series of signs that a stronger housing market will push through until the fall.

Homebuilder ETFs Performance Recap

Even with strong numbers coming out of the Spring, it has taken funds like  (XHB, A+) some time to react. The largest of the three Homebuiler ETFs on the market, the SPDR Homebuilders ETF provides a great snapshot of the market by tracking only domestic public companies that focus on the real estate market and homebuilders. Consider the six-month return of XHB versus the broad U.S. market as represented by the S&P 500 ETF (SPY, A) [also see Homebuilders Battle For Inflows: ITB vs XHB]:

XHB - Exchange Traded Funds - ETF Price Chart for SPDR S&P Homebuilders

XHB has returned 20% since the end of December and at times has outpaced the general market, but not without some strong downturns afterwards. While SPY has maintained a steady rise to a 17% return since last winter, XHB has been a roller coaster, with the most recent climb in May its highest yet. This could mean that a downturn is close, but the new levels reached through home sales could help XHB maintain its position for a while longer.

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Disclosure: No positions at time of writing.