Why Homebuilder ETFs Are Looking Up

Homebuilders  and related exchange traded funds (ETFs) are beginning to see the light at the end of the tunnel, but the outlook is full of obstacles, such as rising interest rates and foreclosures.

Builders are beginning to see their losses shrink compared to their levels a year earlier. Lower prices because of foreclosures have baited homebuyers back into the market, as home prices have fallen at an annual rate of 2.2% in the first quarter, reports James R. Hagerty and John Spence for The Wall Street Journal.

The bottom of the housing market is a way off, but at least some signs of stabilization are in place. The biggest factors that are keeping the housing market down are the continuing unemployment and the increase in foreclosure rate.

Builders have been able to buy big land parcels from banks at lower prices, giving homebuilders a foundation from which to go.

• SPDR S&P Homebuilders (XHB): up 2.8% year-to-date

• iShares Dow Jones U.S. Home Construction (ITB): up2.8% year-to-date

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