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Institutional Investors Nail Down Homebuilder ETFs

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A confluence of lower mortgage rates and rising affordability could give homebuilder exchange-traded funds (ETFs) the necessary fuel to propel further gains. In particular, the SPDR S&P Homebuilders ETF (NYSEArca: XHB) is starting to see institutional investor interest rise.

XHB seeks to provide investment results that correspond generally to the total return performance of an index derived from the homebuilding segment of a U.S. total market composite index. In order to track the performance of the S&P Homebuilders Select Industry Index, the fund employs a sampling strategy.

The fund invests substantially in the securities comprising the index. The index represents the homebuilders segment of the S&P Total Market Index (“S&P TMI”).

Per a report by Riverton Roll, here is the latest purchases on the ETF:

  • BNP Paribas Arbitrage SA grew its stake in SPDR S&P Homebuilders ETF by 42.8% during the 2nd quarter. BNP Paribas Arbitrage SA now owns 1,013,371 shares of the exchange traded fund’s stock valued at $42,237,000 after acquiring an additional 303,721 shares in the last quarter.
  • JPMorgan Chase & Co. grew its stake in SPDR S&P Homebuilders ETF by 106.5% during the 2nd quarter. JPMorgan Chase & Co. now owns 665,867 shares of the exchange traded fund’s stock valued at $27,434,000 after acquiring an additional 10,949,205 shares in the last quarter.
  • Mivtachim The Workers Social Insurance Fund Ltd. Under Special Management purchased a new stake in SPDR S&P Homebuilders ETF during the 2nd quarter valued at about $20,673,000.
  • Bank of Montreal Can grew its stake in SPDR S&P Homebuilders ETF by 181.0% during the 2nd quarter. Bank of Montreal Can now owns 205,071 shares of the exchange traded fund’s stock valued at $8,547,000 after acquiring an additional 458,264 shares in the last quarter.

Leveraged Homebuilder ETFs to Play

Lower bond yields have helped keep interest rates low–a good sign for homebuilders as prospective home buyers pay less for financing. Leveraged plays on home builder stocks include the bullish Direxion Daily Homebuilders and Supplies Bull and Bear 3X Shares (NYSEArca: NAIL), which attempts to deliver triple the daily returns of the Dow Jones U.S. Select Home Construction Index.

Lower mortgage rates could continue to give the housing market a much needed boost, which could translate to more strength for homebuilders. Rising rates, low affordability and rising homebuilder costs due to tariffs have been thorns in the side for the housing market.

This year, the central bank has been keen to keep interest rates unchanged. In addition, the central bank alluded to possible rate cuts for the rest of 2019. Once again, however, the rising costs of supplies could keep home prices rising, but that could be tempered if the current labor market remains robust.

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