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 (WA: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 (NYSE:DHI) , Lennar A Corp (NYSE:LEN) and NVR Inc (NYSE: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. (NYSE:FBHS) and Toll Brothers Inc. (NYSE: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 (NYSE:OC) and Ingersoll-Rand PLC (NYSE: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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