The US property bust was ground zero of the Global Financial crisis. Now, five years later, the business cycle is alive and well and property has turned around. Despite the fact that home ownership is still below peak levels and there is still unsold foreclosure inventory hanging over several real estate markets, the companies in two homebuilding ETFs continue to see improved revenues and margins.

KB Homes announcement of earnings is further confirmation that the sector rebound has legs.

XHB vs. ITB

XHB vs. ITB
Source: Yahoo Finance

The biggest difference between the two is the index. XHB’s index is equal weighted and includes more companies in the homebuilding supply chain. ITB is market capitalization weighted and while it also has supply chain companies, it gives greater weight to the actual builders. That weighting difference accounts for most of ITB‘s relative outperformance. XHB, part of State Street’s SPDR range, is slightly larger than ITB, from Blackrocks iShares range, but both have more than $2bn in assets each.

Top 10 Holdings

XHB % of Total
Standard Pacific Corp 3.650%
PulteGroup Inc 3.619%
Mohawk Industries Inc 3.598%
Toll Brothers Inc 3.553%
Ryland Group Inc/The 3.547%
Tempur-Pedic International Inc 3.529%
Owens Corning 3.496%
Select Comfort Corp 3.480%
Lumber Liquidators Holdings Inc 3.477%
DR Horton Inc 3.472%
ITB % of Total
PulteGroup Inc 10.403%
Lennar Corp 10.158%
DR Horton Inc 9.131%
Toll Brothers Inc 8.486%
NVR Inc 7.088%
Home Depot Inc/The 4.176%
Ryland Group Inc/The 3.927%
Lowe’s Cos Inc 3.550%
MDC Holdings Inc 3.443%
KB Home 3.067%

Source: Bloomberg


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Filed under: Developed MarketsETFInvestment ProductUS

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