By Christine Idzelis
‘For us, at least, it’s maybe a little bit early to wade in’ and buy beaten-down home builders, says Janus Henderson portfolio manager
Hello! This week’s ETF Wrap looks at pummeled home builders – and some worries investors may want to consider before buying the dip.
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It’s been a harsh February for exchange-traded funds focused on home-building stocks.
The iShares U.S. Home Construction ETF ITB has tumbled 8.3% this month through Thursday, while the SPDR S&P Homebuilders ETF XHB slid 7.1% over the same stretch, FactSet data show. Those big drops wiped out the funds’ January gains, leaving them with year-to-date losses.
A gauge of home-builder confidence slumped in February to the lowest level in five months on worries over tariffs and housing costs, according to the National Association of Home Builders.
Investors have recently digested challenging data for the industry, including a report Wednesday from the U.S. Census Bureau that showed new-home sales tanked 10.5% in January. The larger-than-forecast plunge followed the Census Bureau’s Feb. 19 report showing housing starts in January dropped more than Wall Street anticipated.
“The first challenge is that rates are too high,” said José Torres, senior economist at Interactive Brokers, in a phone interview. “There are not enough folks that can come to the table to purchase homes with mortgage rates over 7%.”
Barclays analysts also pointed to high mortgage rates hurting new home sales.
“Higher mortgage rates during January, adverse weather conditions and declining housing starts all seemed to contribute to the decline in sales,” the analysts said in a Barclays economics research note Wednesday. “Since January, mortgage rates have remained relatively steady, indicating that the sales level may be diminished next month and in future months if rates do not trend downward.”
The 30-year fixed-rate mortgage declined to 6.76% on Thursday, from slightly more than 7% in mid-January, according to Freddie Mac data on the website of the Federal Reserve Bank of St. Louis.
Tariff worries
Other near-term challenges for investors considering buying beaten-down stocks in the home-building industry include uncertainties surrounding potential tariffs under the new White House, according to Greg Kuhl, a portfolio manager on the global real-estate team at Janus Henderson Investors.
Tariffs could spark “potential disruption” with respect to home builders’ supply chains, although it remains “an open question” as to how it may play out, Kuhl said in a phone interview.
Still, the worry is that tariffs might raise material costs including lumber, as well as prices of appliances bought for new homes, such as imported washing machines, he said.
The tariff concerns are heaped on top of existing worries over home affordability in the U.S.
“Nationally, home prices have been rising and inventories climbing,” said Yardeni Research in a note Thursday. Home prices in the S&P CoreLogic Case-Shiller 20-city index were up 4.5% in December on a year-over-year basis, the firm said, citing data released Feb. 25.
The median price of a new home sold in the U.S. was $446,300 in January, up 3.7% from a year ago, according to the Barclays note.
The top five holdings of the iShares U.S. Home Construction ETF included D. R. Horton Inc. (DHI), Lennar Corp. (LEN), NVR Inc. (NVR), PulteGroup Inc. (PHM) and Sherwin-Williams Co. (SHW) as of Feb. 26, according to data on BlackRock’s website
The SPDR S&P Homebuilders ETF, which takes a modified equal-weighted approach to its portfolio, holds companies such as Williams-Sonoma Inc. (WSM), Johnson Controls International PLC (JCI), Masco Corp. (MAS), Lennox International Inc. (LII), Home Depot Inc. (HD), Taylor Morrison Home Corp. (TMHC) and Lowe’s Companies Inc. (LOW), according to data on the website of State Street Global Advisors.
Buy the dip?
Home builders have been “disciplined” and likely won’t add to elevated inventories at the risk of then having to discount homes to move them, said Torres. “There’s a lot of inventory out there,” he noted.
While the S&P 500’s SPX home builders have “defied pessimists’ expectations for the longest time” – with improved profitability for much of the past five years, despite predictions of slowdowns during the pandemic as well as the Fed’s rate-hiking cycle, which began in 2022 – their earnings prospects appear “more dubious” than for home-improvement stocks like Home Depot, according to Yardeni Research.
Analysts expect year-over-year earnings comparisons for home builders “to bungee from an 11.4% drop this year to 13.7% growth in 2026,” said Yardeni. “Such a quick rebound seems optimistic.”
“If interest rates and inventories remain elevated, home builders might be forced to cut selling prices or offer higher financing incentives to move inventory,” said Yardeni. “If interest rates fall, the new-home market could face increasing competition from existing homeowners, who have been stuck in their homes and need to sell.”
With home builders still struggling with high mortgage rates and affordability issues for home buyers, the Janus Henderson U.S. Real Estate ETF JRE holds “for-rent” real-estate investment trusts, or REITs, that have benefited from those challenges, according to Kuhl.
For example, the ETF’s portfolio includes American Homes 4 Rent (AMH) , AvalonBay Communities Inc. (AVB) and UDR Inc. (UDR), he noted. Shares of the exchange-trade fund have gained 2.5% this year through Thursday, according to FactSet data.
Meanwhile, the iShares U.S. Home Construction ETF has tumbled 20.5% over the past three months, including a drop of 4.8% so far in 2025. And the SPDR S&P Homebuilders ETF has seen a trailing three-month plunge of 17.8%, including a 3.6% fall this year through Thursday.
But pummeled home builders aren’t yet enticing enough for Kuhl to buy the dip in the current environment – although he described such companies as generally “pretty well run” and said eventually “there’s going to be interesting opportunities.”
“For us, at least, it’s maybe a little bit early to wade in,” he said. “We’re short-term cautious.”
As usual, here’s your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.
The good…
Top performers %Performance PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF 6.9 Vanguard Extended Duration Treasury ETF 6.1 iShares MSCI Hong Kong ETF 4.4 iShares 20+ Year Treasury Bond ETF 4.3 iShares China Large-Cap ETF 4.0 Source: FactSet data. Start date: Feb. 19. End date: Feb 26. Excludes ETNs and leveraged products. Includes NYSE-, Nasdaq- and Cboe-traded ETFs of $500 million or greater.
…and the bad
Bottom performers %Performance YieldMax TSLA Option Income Strategy ETF -21.0 YieldMax COIN Option Income Strategy ETF -16.2 YieldMax MSTR Option Income Strategy ETF -15.6 Fidelity Ethereum Fund ETF -14.5 Grayscale Ethereum Trust ETF -14.3 Source: FactSet data
New ETFs
— State Street Global Advisors announced Thursday the launch of the SPDR SSGA Apollo IG Public & Private Credit ETF PRIV, saying it will invest primarily in investment-grade debt securities, including a mix of “public and private credit such as asset-based finance and corporate lending.”
— JLens said Thursday that it listed the JLens 500 Jewish Advocacy U.S. ETF TOV, an index-tracking fund that “provides exposure to the 500 largest U.S. public companies and screens out companies whose activities do not align with Jewish values.”
— GraniteShares announced on Feb. 26 the launch of the GraniteShares YieldBOOST SPY ETF YSPY and the GraniteShares YieldBOOST QQQ ETF TQQY. They aim to generate yield from options and exposure to the Direxion Daily S&P 500 Bull 3x Shares SPXL and the ProShares UltraPro QQQ TQQQ, respectively, according to the announcement.
— Touchstone Investments said Feb. 24 that it launched the Touchstone Sands Capital Emerging Markets ex-China Growth ETF TEMX, an actively managed fund that invests in stocks in emerging and frontier markets but excludes China and Hong Kong.
Weekly ETF reads
— Bonds are rising as stocks suffer February drop. But don’t count on long-term bonds as a cushion. (MarketWatch)
— State Street, Apollo team up to launch first of its kind private credit ETF (CNBC)
— Wall Street Gamblers Get Crushed as Leveraged ETF Losses Hit 40% (Bloomberg)
— Berkshire Hathaway liquidates holdings in S&P 500 ETFs (Financial Times)
— Gold ETFs drew largest weekly inflow since March 2022, says WGC (Reuters)
-Christine Idzelis
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