ITB, XHB At The Top Of Their Game
September 19, 2012
The iShares Dow Jones U.S. Home Construction Index Fund (NYSEArca: ITB) rallied 2.6 percent Wednesday, extending what has already been an impressive run so far this year, fueled by a fresh round of data that pointed to a two-year high in construction and sales of homes.
The U.S. Department of Commerce said Wednesday that single-family housing starts in August hit 535,000 homes, the highest monthly number since April 2010.
Separately, the National Association of Realtors pegged existing home sales in August at a two-year high of 4.82 million annualized, exceeding many market estimates.
The latest numbers added to a growing perception that the housing market, which was at the epicenter of the 2008 credit crisis, might finally be finding a bottom. As recently as last spring, home values were still tanking to new cycle lows nationally, but home prices have been rebounding since then and now remain about a third off their 2006 peak levels.
Analysts and economists say a bona fide recovery in housing is key for any sustainable recovery in the broad U.S. economy. However, the return of sustainable strength in housing remains clouded by high unemployment rates and tight credit availability at a time when home inventories are relatively high. Indeed, those factors seem to have so far kept a lid on the market’s upside potential.
The next closely watched housing, the monthly S&P/Case-Shiller Home Price Index, is scheduled to come out on Tuesday, Sept. 25. But today’s news on housing was enough to spur a new round of buying in two of the best-performing ETFs year-to-date.
The Hottest ETF
iShares’ ITB is, in fact, the top-performing fund so far in 2012 with gains of nearly 70 percent year-to-date. The fund, which lists names such as Pulte, Lennar Corp. and Home Depot among its top holdings, now has about $1.3 billion in assets. Wednesday's price action put shares of ITB at their highest level since 2008.
ITB’s run Wednesday is particularly impressive given that the Dow Jones industrial average and the S&P 500 Index inked only a 0.1 percent in gains on the day.
The SPDR S&P Homebuilders ETF (NYSEArca: XHB) is another big player in the homebuilders ETF space, with more than $1.56 billion in assets. It jumped 1.76 percent on Wednesday, the latest piece of an impressive run that has lifted the fund by more than 50 percent year-to-date.
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