Real Estate ETFs Will Continue To Face Major Hurdles Ahead

“Over the past year, the real estate sector has been on somewhat of a roller coaster ride as the federal government has poured billions of dollars worth of incentives its way to add stability; however, recent data indicates the sector is far from being stable. According to the Commerce Department, new-home sales dropped 2.2% in February, marking the fewest sales of new homes since 1963, and extending out a fourth month of consecutive declines. The seasonally adjusted annual sales pace of 308,000 pushed inventories of homes up to 9.2 months, the highest level in nearly a year. Some blame this decline on the terrible weather seen in the Northeast, Midwest, and South, whereas others are blaming it on unstable labor markets and rises in foreclosures,” Kevin Grewal Reports From Mainyanville.

Grewal goes on to say, “At the end of 2009, the sector saw a nice spark as a result of government stimulus measures, however, it appears that factors such as a weak job market, stricter lending standards, higher fees charged by lenders, and an overall weak consumer sentiment over the health of the economy are taking its toll on the sector and overshadowing the extended tax incentives being offered.”

“Additionally, the Federal Reserve has pushed lending rates to near record lows, but many are unable or unwilling to make use of these rates. In fact, a recent study indicated that new refinance applications were at their lowest levels over the past year. The primary reason behind this is that homeowners just can’t get refinancing because they have negative equity in their homes and no collateral to back the value of their homes, and the pain of falling home values doesn’t seem to be easing,” Grewal Reports.

See the rest of the story: HERE

The article goes on to talk about three real estate ETFs that that will have direct or indirect influence from a continued fallout in the real estate sector.  We have put together some details on all three ETFs below:

SPDR S&P Homebuilders (XHB)
The investment (XHB) seeks to replicate, net of expenses, the S&P Homebuilders Select Industry Index. The fund will invest at least 95% of assets in securities that comprise the index. The index represents the homebuilding sub-industry portion of the S&P TMI.The fund is nondiversified.

TOP 10 HOLDINGS ( 43.18% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Lennar Corporation Class A Comm (LEN) 4.90
D.R. Horton, Inc. Common Stock (DHI) 4.43
Ryland Group, Inc. (The) Common (RYL) 4.43
KB Home Common Stock (KBH) 4.34
PulteGroup, Inc. Common Stock (PHM) 4.34
Ameron International Corporatio (AMN) 4.32
Tempur-pedic International Inc (TPX) 4.29
M.D.C. Holdings, Inc. Common St (MDC) 4.20
Lennox International, Inc. Comm (LII) 3.98
Mohawk Industries, Inc. Common (MHK) 3.95

Chart for SPDR S&P Homebuilders (XHB)

iShares Dow Jones US Home Construction (ITB)
The investment (ITB) seeks investment results that tracks Dow Jones U.S. Select Home Construction index. The fund generally invests at least 90% of assets in securities of the Underlying index and depositary receipts representing securities of the Underlying index. It may invest the remainder of assets in securities not included in the Underlying index but which BGFA believes will help the fund track Underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. The fund is nondiversified.

TOP 10 HOLDINGS ( 68.04% OF TOTAL ASSETS)  
 
Company Symbol % Assets
NVR, Inc. Common Stock (NVR) 10.50
PulteGroup, Inc. Common Stock (PHM) 10.03
D.R. Horton, Inc. Common Stock (DHI) 9.69
Lennar Corporation Class A Comm (LEN) 8.55
Toll Brothers Inc. Common Stock (TOL) 7.43
KB Home Common Stock (KBH) 4.98
M.D.C. Holdings, Inc. Common St (MDC) 4.73
Ryland Group, Inc. (The) Common (RYL) 4.45
Home Depot, Inc. (The) Common S (HD) 4.00
Meritage Homes Corporation Comm (MTH) 3.68

Chart for iShares Dow Jones US Home Construction (ITB)

iShares FTSE NAREIT Mort Plus Cp Idx (REM)
The investment seeks to replicate, net of expense, the FTSE NAREIT All Mortgage Capped index. The fund generally invests at least 90% of assets in securities of the Underlying index and depositary receipts representing securities of the Underlying index. It may invest the remainder of assets in securities not included in its Underlying index but which BGFA believes will help the fund track its Underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. The fund is nondiversified.

TOP 10 HOLDINGS ( 66.16% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Annaly Capital Management Inc C (NLY) 21.71
Chimera Investment Corporation (CIM) 9.14
MFA Financial, Inc. (MFA) 6.92
Hudson City Bancorp, Inc. (HCBK) 5.76
New York Community Bancorp, Inc (NYB) 5.23
People’s United Financial, Inc. (PBCT) 4.22
Redwood Trust, Inc. Common Stoc (RWT) 3.84
Hatteras Financial Corp Hattera (HTS) 3.26
STARWOOD PROPERTY TRUST, INC. S (STWD) 3.09
Capstead Mortgage Corporation C (CMO) 2.99

Chart for iShares FTSE NAREIT Mort Plus Cp Idx (REM)

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