The Building Permits and Housing Starts data for the month of
February is slated to release later today. This would mark
another important trading day for the homebuilder stocks and
such as the
SPDR S&P Homebuilders ETF (
iShares Dow Jones US Home Construction ETF (
This data is particularly important for the homebuilder ETFs
as it highlights the fundamental picture of the broad
homebuilding industry. Not surprisingly, the two homebuilding
ETFs show huge price variations on the day of this release,
suggesting that this could be another important day for these
increasingly popular ETFs (read
Homebuilder ETFs: Can the Rally Continue?
For example, ITB and XHB slumped 5.74% and 4.45% respectively
following the dismal housing starts number that was released last
month. Furthermore, the month before that, ITB rallied around
2.7% and XHB surged by 1.85% when the data was released for the
previous month, suggesting high levels of volatility can happen
based on this data point.
Not only this, but the building permits and housing starts
data have had a long historical trend of being a major market
moving catalyst for stocks and ETFs from the homebuilding space.
And considering this historical trend, there is no reason to
believe why the case should be anything different this time
Homebuilder ETFs After Housing Data
Homebuilder ETFs in Focus
The two homebuilding ETFs have had an outstanding performance
last fiscal year with tremendous gains. This was primarily due to
the turnaround in the housing market which was fuelled by the
increasing consumer sentiment and spending, marked improvement in
the employment numbers, as well as low interest rates which saw a
surge in mortgage lending activities.
However, last month's dismal housing starts number caused the
ETFs to register massive single day losses. Nevertheless, this
was not entirely bad news for the ETFs as it had made valuations
more reasonable and marked a good entry point for investors
seeking to get in on this important story.
Not only has this brought these ETFs back on their winning
tracks, but it has also ruled out the fact that the Bull Run for
the homebuilder ETFs was over. Thus the dip (red encircled
portion) was clearly a buying time for many investors before the
trend resumed higher (green circle).
Still, it should be noted by investors that ITB is much more
concentrated on the homebuilders space than its SPRD counterpart
XHB. This is because ITB allocates more than 81% of its assets in
the homebuilders space which is excluding retail businesses like
home furnishing and improvements (see
Top Ranked Homebuilder ETF in Focus: XHB
On the other hand, XHB is less concentrated on the pureplay
homebuilding space. Thus we see that any development on the
housing starts number affects ITB more than XHB.
There is no doubt that the Housing Starts number is one of the
most important pieces of information for the homebuilder ETFs.
Therefore investors and traders looking for large single day
movements in this space would keep a close eye on this data
Lastly, both of these ETFs are rated as 'Buys' in terms of the
Zacks ETF Rank (see the
Zacks ETF Rank Guide
). ITB has a Zacks ETF Rank of 1 or
and XHB has a Zacks ETF rank of 2 or
Therefore we expect these ETFs to continue doing well in the near
future, and especially if the data release today is positive.
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ISHARS-DJ HO CO (ITB): ETF Research Reports
SPDR-SP HOMEBLD (XHB): ETF Research Reports
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