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Rough Water for Real Estate ETFs

Stocks in this article: XHBITBIYR

Additionally, it appears that the extension of the $8,000 first-time homebuyer tax credit didn't give the sector the boost that was so strongly desired.

Lastly, from a macroeconomic perspective, until a sustainable turn in the labor markets emerges, existing-home sales will likely feel downward price pressures.

Some ETFs that should keep these forces in mind include:

The SPDR S&P Homebuilders (XHB), which holds shares of homebuilders like Pulte Homes (PHM) and D.R. Horton (DRH). XHB closed at $15.15 Wednesday.

The iShares Dow Jones US Home Construction (ITB), which holds shares of homebuilders like Lennar Corporation (LEN) and NVR (NVR). ITB closed at $12.34 Wednesday.

The iShares Dow Jones US Real Estate (IYR), which focuses on commercial real estate holdings like Simon Property Group (SPG) and Vornado Realty Trust (VNO) and will likely be indirectly influenced by the housing market. IYR close at $44.14 closed Wednesday.

These ETFs have seen a nice upward trend over the past year, but this could come to an end. To help mitigate the risks involved with investing in them, it's important to use an exit strategy with triggers at price points that represent abnormal price weaknesses.

According to www.SmartStops.net, such price points for these previously mentioned ETFs are: XHB at $14.65; ITB at $11.92; IYR at $43.05. These price points fluctuate on a daily basis and are reflective of market conditions and volatility. Updated data can be found at www.SmartStops.net.

-- Written by Kevin Grewal in Laguna Niguel, Calif.

Kevin Grewal serves as the editorial director and research analyst at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Additionally, he serves as the editorial director at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, Grewal was an 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.
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