6 Positive Signals For Real Estate ETFs

At times, it seemed like the housing crisis was so bad we’d never find the bottom. But an increasing number of signs are pointing to a tentative recovery in exchange traded funds (ETFs) aimed at the sector.

What are the arguments in favor of recovery?

• Homebuilder confidence is up. The National Association of Home Builders/Wells Fargo confidence index climbed to 18, the highest since June 18, reports Bob Willis for Bloomberg. A reading below 50 means most respondents view conditions as poor. Builders will eventually begin to start construction back up from record lows.

• Government credits and lower prices may have helped those first-time homebuyers to heal the broken housing market.

• Home prices notched their first quarterly increase in three years today, reports J.W. Elphinstone for the Associated Press. The reading is, however, still down nearly 15% from last year.

• Things have stopped getting worse, and this is the first step to getting better. The marketplace is glutted with inventory, he says, which puts further pressure on prices and total sales - not to mention the need for new houses. This will create more buying opportunities, writes Dan Burrows for SmartMoney.

• Burrows also notes that the bottom or low point in valuations and sales is past, however, there is still a ways for falling prices in areas such as California and Florida. When prices truly stabilize, home builders’ gross and operating margins will improve - and so too will their bottom lines.

• Same-store sales growth in the key markets of Florida, California, Nevada and Arizona where housing has been hit hardest, in such stores that are based on home improvement.

• SPDR S&P Homebuilders (XHB): up 28.6% year-to-date
• iShares Dow Jones U.S. Home Construction (ITB): up 33.2% year-to-date

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Comment by Stephen Wade

2009-08-26 12:52:03

I’m glad Bernanke was renominated. A bit of the benefits you listed above are a direct result of fast acting he and his team did. Now he has to gradually move the FED out from being Savior of the financial sector (and thus homebuilding industry) to being regulator. Best of luck to him!

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