Investors seeking market exposure to the housing market and banking system can do so without picking individual stocks by trading these three exchange-traded funds.
The iShares U.S. Construction ETF (ITB) consists of 44 stocks involved in home construction and homebuilding. D R Horton (DHI) and Lennar (LEN) are the largest components with weightings of 12.28% and 11.22%, respectively.
The iShares U.S. Regional Banks ETF (IAT) consists of 54 bank stocks and super regional banks, US Bancorp (USB) and PNC Financial (PNC) are the top two holdings with weightings of 17.1% and 10.9%, respectively. Note that the four "too big to fail" money center banks are not components of this ETF.
Before we look at the weekly charts and key levels for these ETFs, let's look at the most recent housing market data.
Here's the latest S&P Core Logic Case-Shiller Indices.
The key 20-City Composite had a year-over-year seasonally-adjusted rise of 5.1% in October, up from 5% in September. The month-over-month gain was higher by 0.6% versus 0.4% in September. From the July 2006 peak to the March 2012 trough, prices were down 35.1%. From the trough to the current level home prices are up an unsustainable 43.1% and just 7.1% below the peak.
This chart above shows new home sales for November. New home sales rose in November to a seasonally-adjusted annual rate of 592,000 units, up from 563,000 in October. This chart clearly shows that the sales pace for new homes is significantly below potential.
The chart above shows existing home sales for November. This broader measure of home sales rose to a seasonally adjusted annual rate 5.61 million units up from 5.57 million units in October. Continuing a trend above the 5.5 million sales rate is the important milestone to track, as this level had been a ceiling since 2009, well below pre-crash levels.
Home prices still appear to be too high relative to income growth, and mortgage rates have moved above 4%, this should put a cap on both home prices and home sales.
Below are the weekly charts and key levels for the three ETFs.
The weekly chart shows a red line through the price bars, which is the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean."