Are Housing Stocks Ready to Fly? The XHB homebuilders ETF is showing signs of life

The housing market just can’t catch a break. The expiration of the government’s homebuyer tax credit resulted in a double-dip of sales activity over the summer. And now, prices are sliding again.

To make matters worse, the recent selloff to hit bonds – which was the subject of my last post — is pushing mortgage rates higher. The 30-year fixed mortgage rate has climbed from a record-low of 4.17% just a few weeks ago to more than 4.6% now. That’s hitting housing affordability at just about the worst possible time as the “shadow” inventory of foreclosed homes starts to hit the market as the foreclosure moratorium related to shoddy bank paperwork comes to an end.

And by extension, the same goes for housing stocks. While the overall stock market is pushing to new multi-year highs, the Homebuilders Index ETF (NYSE: XHB) has been stuck in purgatory since falling from its April highs and is down nearly -14% over the period. The same goes for its major constituents, including Toll Brothers (NYSE: TOL), PulteGroup (NYSE: PHM), KB Home (NYSE: KBH).

But now, there is some evidence that buyers are cautious returning to the sector. (more)