Investors seeking market exposure to the housing market and banking system can do so without picking stocks by trading these three exchange-traded funds.
The iShares U.S. Construction ETF (ITB) has 44 components involved in home construction. The largest holdings in this exchange-traded fund are D R Horton (DHI) and Lennar (LEN) with weightings of 12.64% and 10.98%, respectively.
The iShares U.S. Regional Banks ETF (IAT) has 54 components that are considered regional banks, but does not include the four "too big to fail" money center banks. The largest holdings in this ETF are US Bancorp (USB) and PNC Financial (PNC) are the top two holdings with weightings of 17.1% and 10.9%, respectively.
The First Trust NASDAQ ABA Community Bank Index Fund (QABA) has 160 components considered smaller publicly-traded banks. The largest holding of this ETF is now East West Bancorp (EWBC) with just a 3.16% weighting.
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 5.3% in November, up from 5.1% in October. The seasonally-adjusted month-over-month gain rose to 0.9% in November versus 0.6% in October. 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 43.3% and just 7.0% below the peak.
This chart above shows sales of newly built single-family home sales for December, population-adjusted. New home sales fell by 10.4% in December to a seasonally-adjusted annual rate of 536,000 units. For all of 2016, sales were up 12.2% to 563,000, the highest annual rate since 2007. This chart clearly shows that the sales pace for new homes is significantly below potential.
The National Association of Home Builders reports that the inventory of new homes rose by 10% in 2016. Building homes on speculation could become a problem given the higher prices and higher mortgage rates. As an additional warning on of the latest readings on mortgage applications came in at a 13-year low. The median sale price of a new home was reported at $322,500, which appears as a reach for the average family on Main Street, USA.
The chart above shows existing home sales for December. This broader measure of home sales slipped to a seasonally adjusted annual rate 5.49 million units down from 5.65 million in November. 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. The National Association of Realtors put a positive spin on this data, touting that existing home sales for 2016 was the highest in a decade. The graph tells the true story!
Now, here are the weekly charts and key levels for the three ETFs.