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In this episode of ETF Spotlight, I speak with Zacks Senior Equity Strategist, Tracey Ryniec, about the housing market. As the Federal Reserve continues to raise rates aggressively, the housing market has plunged from its pandemic-driven highs.

The average rate on a 30-year, fixed-rate mortgage had surged to over 7% last month, up from about 3.45% at the start of the year. Homebuyers now need to earn a six-figure income to afford the monthly mortgage payment on a median-priced home, up almost 50% from a year ago, per Bloomberg,

Shares of home builders look very cheap, but Tracey believes it is still too early to buy the dip. Interest in home renovations and improvements remains relatively strong, and those stocks have fared slightly better this year.

The iShares U.S. Home Construction ETF (ITB - Free Report) and the SPDR S&P Homebuilders ETF (XHB - Free Report) have rebounded in November but are still down about 26% year-to-date.

ITB tracks a market cap-weighted ETF of home construction and related stocks. It is top heavy with four holdings--D.R. Horton (DHI - Free Report), Lennar (LEN - Free Report), NVR (NVR - Free Report), and PulteGroup (PHM - Free Report) --accounting for about 45% of the portfolio.

XHB is an equal-weighted ETF that has significant exposure to building products and home-furnishing companies as well in addition to homebuilders.

Toll Brothers (TOL - Free Report), the luxury homebuilder, and Beazer Homes (BZH - Free Report), which builds affordable homes, are both currently ranked Zacks Rank #5 (Strong Sell) but are worth watching.  Investors could also add Williams Sonoma (WSM - Free Report), Pool (POOL - Free Report) and Trex (TREX - Free Report) ) to their watchlists.

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