Four ETFs Hit By Falling Home Values (ITB, XHB, IYR, SRS, NVR, LEN, PHM, DRH)

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May 31, 2011 1:37pm NYSE:ITB NYSE:IYR

Kevin Grewal:  According to the S&P/Case-Shiller index of property values in 20 major cities, the housing sector continues to face headwinds and remains in a slump.


The index fell 3.6 percent from March 2010 to March 2011, marking the largest year-over-year decline since November 2009 and reached its weakest point since March 2003.  Furthermore, pending sales of previously owned homes dropped a whopping 12 percent in April from the prior month, forcing many home builders to be wary of when a recovery could be in sight. 

The light at the end of the tunnel for the residential real estate market seems to getting farther and farther as a backlog of foreclosures are expected to hit the market this year, which is likely to keep prices depressed, unemployment levels continue to tether higher and fail to shows significant signs of improvement, leaving uncertainty in the labor markets and lenders continue to implement stricter requirements and conditions making harder for a consumer to secure a mortgage loan. 

At the end of the day, the residential real estate markets are likely to remain depressed in the near term future as the mess of the global financial crisis continues to unwind and the health of the labor force remains cloudy.

Some ETFs influenced by falling home prices include:

  • iShares Dow Jones US Home Construction (NYSE:ITB) which includes home building stocks like Lennar Corp (NYSE:LEN) and NVR Inc. (NYSE:NVR).
  • SPDR S&P Homebuilders (NYSE:XHB) which includes home builders such as Pulte Homes (NYSE:PHM) and D.R. Horton (NYSE:DRH) as top holdings.
  • iShares Dow Jones US Real Estate (NYSE:IYR), which is more based on commercial real estate holdings which will be indirectly influenced by the residential real estate market
  • ProShares Ultra Short Real Estate (NYSE:SRS), which is an inverse play on the real estate markets.

Written By Kevin Grewal From ETF Tutor  Disclosure: No Positions 

Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton. He is a contributing author on The Street – his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville.


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