Homebuilder ETFs' 3-Digit Gains

Realtor holding a key to a house
Credit: Shutterstock

Cinthia Murphy, Managing Editor,

Exchange-traded funds focused on homebuilder stocks are forging new records amid strong demand for housing, tightening inventory of existing homes, and low mortgage rates. This upward momentum is largely tied to the global pandemic, as work-from-home translates into demand for houses and for house-related goods and services.

In its most recent assessment, the National Association of Realtors reported that existing home sales jumped 24.7% in July—the second consecutive month-on-month record—while median home prices rose 8.5% on the year to break above $300,000 for the first time.

The two biggest homebuilder ETFs, the iShares U.S. Home Construction ETF (ITB) and the SPDR S&P Homebuilders ETF (XHB), have now tallied gains of 122% and 110%, respectively, since the market hit a low on March 23, outpacing the broader stock market as measured by the SPDR S&P 500 ETF Trust (SPY):

ITB and XHB vs SPY

Chart courtesy of

Both ITB and XHB set out to capture homebuilders, and ITB offers the purer homebuilder portfolio of the two, thanks to its market-cap-weighted mix led by the likes of Lennar Corp, DR Horton and PulteGroup. Some 56% of the fund is tied to homebuilder stocks, while equal-weighted XHB has only 26% of its portfolio tied to these names.

But the returns these ETFs are delivering aren’t only tied to homebuilders. Both ETFs also access home furnishings, home improvement and some retailers in this space, and the latest round of earnings shows that most of these home-related companies are doing well this year.

Consider that in ITB’s portfolio, 98% of the companies beat earnings-per-share estimates in the second quarter by an average of 19%, according to ETF Action. In XHB, 94% of them beat EPS estimates by an average of 16%.

Investors have certainly been taking note, pouring $700 million into ITB and $200 million into XHB since March 23. These funds now sit at $2.1 billion and $1.1 billion in total assets, respectively.

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