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Homebuilder ETFs Slammed as Case-Shiller Hits Record Levels

Tuesday, October 25, 2016 10:17
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Real estateIt looks to be another day of bloodletting for the U.S. Homebuilders and related Construction names today, as we see several benchmark index funds in the space getting hammered.

The iShares Dow Jones US Home Construction ETF (NYSE:ITB) (Expense Ratio 0.43%, $1.19 billion in AUM) is down more than 2% in afternoon trading, hovering at late June lows, and we should point out that the fund is presently the largest “Homebuilders” ETF in the hotly contested space. Second in line is XHB (SPDR Homebuilders, Expense Ratio 0.35%, $1.01 billion in AUM) for AUM supremacy.

Both funds have had a rough time year-to-date in terms of asset flows, as ITB has seen a substantial $680 million vacate the fund via redemption pressure and XHB has seen its fair share of outflows as well (-$580 million out). Today’s sharp sell-off in the Homebuilders and Construction space seems to be tied to the Housing Price Index coming in higher than analyst expectations this morning. Basically all of the significant gains that the space experienced from the late June lows up until late August have evaporated in both ITB and XHB, with the funds pivoting once again on these late June lows.

There is considerable “drop-off” in terms of fund sizes after the aforementioned funds in the Homebuilders and Construction space, with the third largest fund PKB (PowerShares Dynamic Building & Construction Portfolio, Expense Ratio 0.63%) currently being the home of only $82 million in assets under management. Given the heavy sell-off here we are surprised not to see more activity in a “Levered Bear” fund, but this name is newer to the space and perhaps unrecognized by many potential ETF portfolio managers and traders. CLAW (Direxion Daily Homebuilders & Supplies Bear 3X Shares, Expense Ratio 0.95%, $3.6 million in AUM) immediately comes to mind, having debuted in the summer of 2015. This fund is clearly small in size and has scant average daily trading volume presently at about 1,100 shares, but could potentially catch interest in the substantial down move here in the Homebuilders and Construction segment.

ITB shares fell $0.70 (-2.62%) to $26.01 in afternoon trading Tuesday. Year-to-date, the largest ETF focused on homebuilders has now fallen 4.21%.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.

Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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