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Foreign Investment in U.S. Housing Surges: ETFs to Buy

Foreign investment in U.S. housing has surged 49% from April 2016 to March 2017, per the National Association of Realtors.


The data is based on responses from 6,000 realtors for a survey conducted by the association annually.


International buyers bought a record $153 billion worth of U.S. residential properties in the year-ended March 2017 compared with $102.6 billion in March 2016. The report shows a record 284,455 properties purchased in the year.


Almost half the foreign sales were recorded in three states, Florida, California and Texas. Chinese buyers top the list of foreign buyers purchasing $31.7 billion worth of residential properties. This was followed by buyers from Canada, U.K., Mexico and India who spent $19 billion, $9.5 billion, $9.3 billion and $7.8 billion, respectively.


The median sales price for foreigners was $302,290 compared with $277,380 in the previous period, while around 10% of the foreign buyers spent over $1 million (read: Housing Stands Tall in 2017: ETFs in Focus). 


Surprisingly, the sales surged despite Trump’s anti-immigration rhetoric and a stronger dollar relative to other currencies. The status of a safe haven overshadowed the growing political uncertainty in the region (read: Sector ETFs & Stocks to Tap Q2 Earnings Growth).


Let us now discuss a few ETFs focused on providing exposure to the U.S. housing market.


iShares U.S. Home Construction ETF ITB


This fund seeks to provide exposure to domestic construction stocks involved in constructing residential homes.


It has AUM of $1.65 billion and charges a fee of 44 basis points a year. Homebuilding, Building Products and Home Improvement Retail are the top three sectors of this fund with 65.65%, 14.83% and 8.44% allocation, respectively (as of July 17, 2017). The top three holdings of this fund are D R Horton Inc DHI, Lennar A Corp LEN and NVR Inc NVR, with 12.30%, 10.74% and 8.85% allocation, respectively (as of July 17, 2017).  It has returned 24.16% year to date and 15.86% in the last one year (as of July 18, 2017). ITB currently has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.


SPDR Homebuilders ETF XHB


This fund seeks to provide exposure to the homebuilders sector and targets an equal weight methodology.


It has AUM of $1.04 billion and charges a fee of 35 basis points a year. Homebuilding, Building Products and Home Furnishings are the top three sectors of this fund with 32.44%, 31.99% and 11.65% allocation, respectively (as of July 17, 2017). The top three holdings of this fund are D R Horton Inc, Fortune Brands Home & Security Inc. FBHS and Toll Brothers Inc. TOL, with 4.80%, 4.66% and 4.64% allocation, respectively (as of July 17, 2017).  It has returned 14.03% year to date and 8.43% in the last one year (as of July 18, 2017). XHB currently has a Zacks ETF Rank #1 with a High risk outlook.


PowerShares Dynamic Building & Construction Portfolio ETF PKB


This fund seeks to provide exposure to construction companies involved in construction of residential, commercial or infrastructure projects.


It has AUM of $313.7 million and charges a fee of 68 basis points a year. Construction Materials, Building Products and Homebuilding are the top three sectors of this fund with 21.16%, 20.83% and 18.77% allocation, respectively (as of March 31, 2017). The top three holdings of this fund are NVR Inc, Owens Corning OC and Ingersoll-Rand PLC IR, with 5.33%, 5.14% and 5.02% allocation, respectively (as of July 17, 2017).  It has returned 6.10% year to date and 8.12% in the last one year (as of July 18, 2017). PKB currently has a Zacks ETF Rank #2 (Buy) with a High risk outlook.


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Owens Corning Inc (OC): Free Stock Analysis Report
 
Lennar Corporation (LEN): Free Stock Analysis Report
 
Toll Brothers Inc. (TOL): Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI): Free Stock Analysis Report
 
NVR, Inc. (NVR): Free Stock Analysis Report
 
SPDR-SP HOMEBLD (XHB): ETF Research Reports
 
ISHARS-US HO CO (ITB): ETF Research Reports
 
PWRSH-DYN BLDG (PKB): ETF Research Reports
 
Ingersoll-Rand PLC (Ireland) (IR): Free Stock Analysis Report
 
Fortune Brands Home & Security, Inc. (FBHS): Free Stock Analysis Report
 
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