3 Homebuilder ETFs To Buy On Robust Housing Demand

NYSE: XHB | SPDR Series Trust SPDR Homebuilders ETF News, Ratings, and Charts

The real estate industry was one of the most prominent performers last year, registering record gains since the 2008 bubble. Along with the pandemic-induced remote working and learning culture, low mortgage rates bolstered the demand for housing last year. A larger proportion of young people entering the workforce also contributed to the rising demand.

Realtor.com’s chief economist Danielle Hale recently stated in a Forbes article that housing sales are likely to increase 7% this year, while prices will rise 5-7% from 2020 values. One of the main reasons behind such price rise is the supply-related constraints, as most real estate companies are reporting low inventories.

Apart from the mainstream housing industry, the ancillary home repairing and renovating segments have also been outperforming the broader markets, as people have actively taken up home improvement projects with ample spare time on their hands amid the pandemic. With most companies announcing their goals to adopt a hybrid work model post-pandemic, the demand for such home development products should increase over the coming months. This, coupled with President Biden’s $500 billion sustainable infrastructure investment plan, should allow the housing industry to maintain its growth momentum in the long run.

In light of such developments, we think ETFs such as SPDR S&P Homebuilders ETF (XHB - Get Rating), Hoya Capital Housing ETF (HOMZ - Get Rating), and iShares U.S. Home Construction ETF (ITB - Get Rating) should deliver impressive returns in the upcoming months.

SPDR S&P Homebuilders ETF (XHB - Get Rating)

XHB is one of the most popular ETFs in the homebuilding industry, investing in companies operating in the US housing sector. This ETF follows an equal weighting policy, assigning equal importance to all portfolio holdings, thereby eliminating investment noise and minimizing risk. It closely tracks the S&P homebuilders Select Industry Index with approximately $1.46 billion assets under management. XHB has an MSCI ESG Fund Rating of A and is currently ranked in the 77th percentile among its peer group. Its top holdings include Williams-Sonoma, Inc. (WSM), RH (RH), and Johnson Controls International plc (JCI).

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