This ETF has rallied nicely from the lows of 2008 and 2009, thanks to “much cleaner balance sheets,” according to Goldsborough. That said, it’s still down by more than half from its peaks in 2006 and 2007. This ETF’s expense ratio of 0.45 percent is roughly in line-with other niche-specific funds.
For investors who remain convinced that the housing recovery will favor sales of existing homes rather than new ones, the SPDR S&P Homebuilders ETF (XHB) may hold greater appeal. A greater emphasis is placed on the key industry suppliers and retailers that support both new home construction and home renovation projects. Mohawk Industries, which makes flooring materials, is a typical holding. This fund has the added virtue of a reasonable 0.35 percent expense ratio.
Investors can also check out the PowerShares Dynamic Building & Construction Portfolio (PKB) fund, which tracks an index of homebuilders and related firms. The key twist: the index is frequently rebalanced to provide a greater weighting to factors such as price and earnings momentum. That active approach leads to a fairly stiff 0.63 expense ratio. This fund has underperformed the other two ETFs on a five-year annualized basis.
From a demographic perspective, the housing market appears poised for an extended upturn as incomes rise, the population swells and renters take the plunge into home ownership. Though the upturn may start gradually, it could build a robust head of steam in the latter half of the decade. These ETFs stand out as the best ways to play the housing market renaissance.