Tag Archives: homx

Should You Buy Housing ETFs Now?

The housing industry is steadily picking up pace as evident from the numbers released recently. Housing starts rose 0.2% in July to a seasonally adjusted annual rate of 1.21 million last month, the highest since October 2007. Starts on single-family houses surged 12.8% last month. This morning, the National Association of Realtors reported that its pending home sales index increased 7.4% year over year in July. Sales of new homes surged 26% last month, compared with July last year. Last week, the National Association of Home Builders reported that homebuilder sentiment rose to its highest level since November 2005. The housing market has been attracting many buyers and renters of late, thanks mainly to steady gains in the job market and low mortgage rates. In fact, even though builders have ramped up construction, the demand still exceeds supply, pushing up prices. Homeowners are also willing to spend more on upgrades and improvements as evident from Home Depot’s (NYSE: HD ) strong results last week. The company raised its guidance for the second time this year. Even with strong gains of late, the housing market is nowhere near bubble levels as housing starts of about 1.5 million are considered “normal” by economists. Further, despite low rates, mortgage originations have seen weak growth in 2015, mainly due to tight credit standards and low levels of refinancing. With improving economy and labor markets, banks could loosen their standards for homebuyers. Lastly, the Fed may keep rates unchanged this year in view of the recent market turmoil. All these factors are likely to support the housing market in the coming months. In the short video below, we have discussed three housing ETFs – the iShares Dow Jones US Home Construction ETF (NYSEARCA: ITB ), the SPDR S&P Homebuilders ETF (NYSEARCA: XHB ) and Etracs ISE Exclusively Homebuilders ETN (NYSEARCA: HOMX ) – which are actually very different in terms of their exposure to homebuilding and related sub-industries. Original Post Share this article with a colleague

Inside ProShares’ Bull And Bear Leveraged Homebuilding ETFs

Over the last few months, issuers have been showing immense interest in the housing ETF space. Before 2015, the space was devoid of leverage and inverse ETFs, but the industry filled this gap this year having seen housing ETF launches in all forms. In fact, a couple of bull/bear leveraged products targeted at the housing market are still in the pipeline. Let’s take a look at two newly launched leveraged housing ETFs by ProShares designed in both long and short manners. Newly Launched ETFs in Focus The ProShares Ultra Homebuilders & Supplies ETF (NYSEARCA: HBU ) looks to offer double the daily exposure to the Dow Jones U.S. Select Home Construction Index, while the ProShares UltraShort Homebuilders & Supplies ETF (NYSEARCA: HBZ ) gives twice the opposite exposure of the daily performance of the same index. Both funds charge 95 bps in fees. The benchmark follows the performance of a basket of 40 homebuilding companies. The index is heavily concentrated on the top 10 holdings in which it puts around 65% of assets. Lennar Corp. (NYSE: LEN ) (11.20%), D. R. Horton Inc. (NYSE: DHI ) (11.15%) and PulteGroup (NYSE: PHM ) (8.47%) take the top three spots in the basket and make up for a combined 31% share. How Do These Fit in a Portfolio? These products could be interesting choices for those seeking a targeted exposure to the U.S. homebuilding sector. The space has turned around this year again on sustained economic recovery, a healing job market, rising consumer confidence, moderating home prices and, of course, low interest rates prevailing in the U.S. Though the first quarter was downbeat for the sector, spring sprung good news for the companies. In any case, its key selling season started in March and will run through the back-to-school season in September. A plunge in yields is another positive for the space. Even if mortgage rates rise in the latter half of the year – as is widely anticipated – housing will likely remain reasonable. To add to the positives, the White House plans to slash premiums on mortgage insurance should prove a tailwind for mortgage availability, pushing first-time homebuyers to purchase houses. Overall, the sector has set off for a decent start for the future and investors can very well capitalize on this trend via the leverage bull ETF HBU. Having said this, we would like note that the space is highly rate sensitive. And with the Fed expected to hike key rates sometime later in 2015, mortgage rates will see some upheaval. This might have investors who are pinning hopes on the housing market boom tread in trouble waters for a short while. However, investors can ride on this momentary dip via HBZ, the objective of which is to gain from a housing market downturn. ETF Competition The homebuilding ETFs space previously used to be closely-tied area. But in 2015, a sudden boom in housing-related product launches has been noticed. Earlier, there were three regular housing ETFs, namely the iShares U.S. Home Construction ETF (NYSEARCA: ITB ) , the SPDR Homebuilders ETF (NYSEARCA: XHB ) and the PowerShares Dynamic Building & Construction Portfolio ETF (NYSEARCA: PKB ) . But this year, two new products from UBS – the ETRACS ISE Exclusively Homebuilders ETN (NYSEARCA: HOMX ) and the Etracs Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (NYSEARCA: HOML ) – have hit the market. Being a twice leveraged product, HOML could pose as a threat to HBU. This is truer given that HOML charges (85 bps in fees) lower than HBU. The difference between daily (in the case of HBU) and monthly resetting technique (for HOML) might have caused this disparity in expense ratio. However, there is no visible risk for the leveraged bear ETF as any product in this category is yet to enter the market. Link to the original article on Zacks.com