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Proprietary Data Insights Financial Pros Homebuilder ETF Searches in the Last Month
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ETFs |
With Home Sales Down, Is It Time to Buy This Homebuilder ETF? |
People are applying for mortgages less than they have in more than 25 years, according to data from Redfin. New home sales are down 35% from a year earlier. Higher interest rates have made it more expensive for people to buy homes. But the housing market has rebounded from worse conditions, and historically, homes appreciate in value over time. And financial pros are starting to take a hard look at homebuilders after an off year, according to the latest data from our proprietary sentiment indicator, Trackstar. The SPDR S&P Homebuilders ETF (XHB) was financial pros’ most searched homebuilder ETF and one of the top ETF searches overall in December. With the housing market cooling off, is it time to get into this homebuilder ETF? SPDR S&P Homebuilders ETF The SPDR S&P Homebuilders ETF provides investors with exposure to the homebuilder segment of the S&P Total Market Index. XHB may include exposure to the subindustries of building products, home furnishings, home improvement retail, home furnishing retail, and household appliances. Key Facts About XHB
There are 35 holdings in the XHB portfolio. The top 10 holdings below make up nearly 40% of its weight. Source: State Street Corporation Building-products companies comprise 46.8% of the fund’s weighted holdings, followed by homebuilders at 30.4%. Source: State Street Corporation This is an important point many investors ignore: XHB isn’t a pure play on homebuilders. Rather, it’s an ETF that plays on the health of the home-building industry. Performance XHB began trading on January 31, 2006. Over the last 10 years, it has returned an average of 9.5% annually. It’s returned 7.4% annually over the last five years. But last year was hard, as the ETF fell 28.9%. Source: State Street Corporation Investing & Trading XHB An average of 3.3 million shares of XHB trade daily. The ETF is both optionable and shortable. Investors will be happy to hear that the ETF pays an annual dividend of $0.77, a yield of 1.2%. Competition Investors seeking exposure to homebuilders via ETFs have a few options besides XHB. They include the iShares U.S. Home Construction ETF (ITB), Invesco Dynamic Building & Construction ETF (PKB), iShares U.S. Real Estate ETF (IYR), and Hoya Capital Housing ETF (HOMZ). Portfolio Composition
Holdings & Top 10 Weighting
HOMZ is the most diversified of these ETFs, with 103 positions. In addition, its top 10 holdings are just 19.4% of its weighting. XHB has fewer positions than IYR and PKB, but its top 10 weightings are smaller. Fees
XHB charges an expense ratio of 0.35%, which is less than most other homebuilding ETFs. Dividend
IYR and HOMZ offer dividends of 2.84% and 2.00%, respectively. HOMZ also has a less concentrated portfolio than the other ETFs here. Performance (3 Years, Compounded Annually)
Out of the group, ITB has performed best over the last three, five, and 10 years, but XHB didn’t trail by much, with returns of 39.7% the last five years compared to ITB’s 40.1%. Our Opinion 8/10 Higher interest rates have made it more expensive to buy homes. As Redfin noted, there have been fewer mortgage applications than there have been in more than 25 years. 2022 was hard for XHB shareholders. This difficulty may continue in 2023. But no one can time the market perfectly, and historically, the ETF has posted strong returns. That’s why we think nibbling on shares at these levels makes sense, as does buying more if XHB dips further. |
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