Three top-performing homebuilding ETFs offer broad exposure to the industry as a strong job market keeps a floor under demand even as mortgage rates surge to a two-decade high.
The three funds are the iShares U.S. Home Construction ETF, Invesco Dynamic Building & Construction ETF, and SPDR S&P Homebuilders ETF, which are involved in homebuilding, supplying building products, and home improvement.
- The three ETFs, ranked by one-year trailing total return, are the iShares U.S. Home Construction ETF, the Invesco Dynamic Building & Construction ETF, and the SPDR S&P Homebuilders ETF.
- The funds have outperformed the homebuilding industry during the past year while underperforming the broader U.S. stock market.
- The top holding of the first two funds is D.R. Horton Inc. and the top one of the third is Johnson Controls International PLC.
The funds listed above are the only three homebuilder ETFs that trade in the U.S., excluding inverse and leveraged ETFs and those with under $50 million in assets under management (AUM). The three funds have fallen more than the S&P 500 Index's 19% drop and less than the S&P 1500 Homebuilding Sub-Industry Index's 28% plunge in the last year as of Nov. 9. We examine all three of these funds below. All numbers below are as of Nov. 10.
- Performance Over One Year: -19.2%
- Expense Ratio: 0.39%
- Annual Dividend Yield: 0.42%
- Three-Month Average Daily Volume: 2,722,047
- Assets Under Management: $1.1 billion
- Inception Date: May 1, 2006
- Issuer: BlackRock Financial Management
ITB is a multi-cap, blended fund that tracks the Dow Jones U.S. Select Home Construction Index. The index is composed of U.S. equities in the home construction industry. Just over two-thirds of the fund's assets are invested in homebuilding stocks, with building products and home improvement retail securities in the remaining third.
The top holdings of ITB include D.R. Horton Inc. (DHI); Class A shares of Lennar Corp. (LEN); and NVR Inc. (NVR), all of which are homebuilding companies. The first two represent over a quarter of ITB's invested assets.
- Performance Over One Year: -19.8%
- Expense Ratio: 0.57%
- Annual Dividend Yield: 0.22%
- Three-Month Average Daily Volume: 9,541
- Assets Under Management: $105.1 million
- Inception Date: Oct. 26, 2005
- Issuer: Invesco
PKB tracks the Dynamic Building & Construction Intellidex Index and offers exposure to the U.S. home-building industry. In addition to pure play home builders, this fund includes home improvement chains and other companies linked to the industry. PKB may be attractive to investors who expect the methodology used by the underlying index—which utilizes quant-based stock screens— to generate alpha.
PKB's top three holdings are D.R. Horton; Class A shares of Lennar; and Tractor Supply Co. (TSCO), a farm- and ranch-oriented lawn care and home improvement store chain.
- Performance Over One Year: -22.2%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 0.52%
- Three-Month Average Daily Volume: 3,617,014
- Assets Under Management: $784.2 million
- Inception Date: Jan. 31, 2006
- Issuer: State Street
XHB gives investors exposure to the U.S. home-building industry by tracking the S&P Homebuilders Select Industry Index, which represents the home-building subindustry portion of the S&P Total Market Index. The ETF uses an equal weight approach in which companies with larger and smaller market capitalizations are given similar exposure. XHB follows a blended strategy, investing in a mix of growth and value stocks. The fund's largest allocation is in companies that provide building products, followed by home builders and home improvement retailers.
XHB's top three holdings are Johnson Controls International PLC (JCI), an Irish-American maker of fire, HVAC, and security equipment; D.R. Horton, and Trane Technologies PLC (TT), an Irish-American manufacturer of HVAC equipment and refrigeration systems.
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