As the Federal Reserve continues to hint a raising rates soon, inevitably the focus comes back to home builders. Will the be able to thrive in a higher rate environment? The analysis is pretty simple. Home prices have been rising steadily now for a while and the home builders can justify the higher prices because the buyers can obtain loans at the lowest rates in history. But, what happens when rates begin to rise? Will the home buyer demand lower prices to offset the increase in interest?
At the moment the home builders have been doing well. A steady increase in new home sales, along with a steady push of new customers at the door leads to a nice market for those that build homes for a living. Looking at data that analyses the stream of new home applicants also shows a steady in crease. So let's say you want to participate in the strength of the home builders, what are you choices?
There are currently two good choices, but both have some significant differences. The iShares U.S. Home Construction ETF
The ITB:
The iShares
The XHB:
Now, the SPDR Home builders ETF
In either case, you have products that are balanced to a point where you don't have direct exposure to only the home building companies.