Home>Video>A Broader Way to Build Housing-Sector Exposure

A Broader Way to Build Housing-Sector Exposure

Thu, 7 May 2015

SPDR S&P Homebuilders ETF--which also holds home-furnishing, building-products, and home-retailer stocks--is a low-cost way to invest in a sector with positive potential.


Video Transcript

Bob Goldsborough: For inexpensive exposure to the United States' homebuilding sector, one exchange-traded fund that investors can consider is SPDR S&P Homebuilders ETF (XHB). It's far and away the largest homebuilding ETF, and it holds homebuilding companies, building-products manufacturers like Masco (MAS), home-furnishing retailers, and home-improvement retailers like Home Depot (HD) and Lowe's (LOW).

Since the start of the year, the homebuilding sector has posted mixed data. However, there are some clear conditions in place that offer the sector the potential to perform well looking ahead. These include still-tight home inventories, cheap credit, growth in the household formation rate, and strong employment trends.

Some of the concerns regarding the sector include home prices growing more rapidly than workers' wages, potential for an interest-rate hike from the Federal Reserve, and recent weak housing-start data. Overall, Morningstar's equity analysts take a positive view toward the homebuilding sector.

When choosing a homebuilding ETF, price is an important consideration as all such funds tend to perform similarly. XHB charges an annual fee of 35 basis points, which is more than 25% less than its closest peer.

  1. Related Videos
  2. Related Articles
  1. Get the Best Out of Active and Index Funds

    In this 60-minute roundtable report, Morningstar's Russ Kinnel, Ben Johnson, John Rekenthaler, and Christine Benz dissect indexing's popularity, index versus active fund performance, and how investors can effectively blend the best of both in a portfolio.

  2. ETF Investors Seeking Income, Inflation Protection

    Morningstar's Scott Burns discusses investor demand for dividends, international TIPS, and deeper exposure to emerging-market consumers with State Street's Tony Rochte.

  3. Our Favorite Energy ETF

    Energy Select Sector SPDR is a low-cost, liquid tool for strong-stomached investors seeking broad-based energy exposure.

  4. Indexes Don't Maximize High-Yield Bonds

    Morningstar's Alex Bryan walks investors through some of the pros and cons of index-based ETFs versus actively managed funds in the high-yield bond category.

  5. Reduce Volatility and Increase Yield With This ETF

    SPDR Barclays Convertible Securities ETF is a smart buy for equity investors willing to trade some of the upside of equities for some downside protection and yield.

  6. What You Need to Know Before Buying ETFs

    Transitioning from mutual funds to ETFs for their low costs and tax efficiency is tempting, but some of these advantages may be exaggerated, says Vanguard's Joel Dickson.

  7. 3 ETF Options for International Small-Cap Exposure

    Vanguard FTSE All-World ex-US Small-Cap provides exposure to both developed- and emerging-markets small caps, while WisdomTree offers a dividend-focused ETF and a currency-hedged ETF.

  8. ETF Investors Keep It Simple

    Despite the profusion of niche ETF products coming to market, investors are still showing a strong preference for low-cost, plain-vanilla equity exposure, says Morningstar's Ben Johnson.

©2017 Morningstar Advisor. All right reserved.