Foreclosure Inventory Could Hinder Real Estate ETFs

As the number of foreclosures around the nation continues to climb, a massive flooding of these homes into the market could result in a supply shock which could eventually depress real estate prices, effecting the iShares Dow Jones US Home Construction (IYB), PowerShares Dynamic Building & Construct (PKB) and the SPDR S&P Homebuilders (XHB).

According to Clea Benson of Businessweek, the inventory of foreclosed homes that government-controlled Fannie Mae (FNMA) and Freddie Mac (FMCC) currently have has quadrupled over the past three years and stands at a whopping $24 billion.  Furthermore, the physical number of homes that these two companies own has increased to nearly 242,000 and is likely to continue going up.  In fact, RealtyTrac, a data company specializing in compiling data on residential real estate, expects the number of homes subject to foreclosure filings to rise by as much as 20 percent this year.  Read more of this post


Two ETFs Likely To Be Hit By Increased Foreclosures

Despite a slowdown in foreclosure filings in December 2010, Irvine-based real estate database seller and tracker, RealtyTrac, expects the number of US households receiving foreclosure notices to significantly jump in 2011, putting additional stress on the US economy, homebuilders and the SPDR S&P Homebuilders (XHB) and the PowerShares Dynamic Building & Construct (PKB).

The total number of foreclosure filings in December totaled 257,747, marking the lowest monthly tally since June 2008 and an eight percent decrease from the prior month.  Furthermore, RealtyTrac suggests that this decline was driven by increased scrutiny over lenders and their practices.   Lenders in all 50 states are being investigated on whether or not banks and loan servicers used faulty documents and signatures on loan documents to execute and issue loans for those who did not qualify.  Read more of this post

Homebuilder ETFs Likely To Fall

The Commerce Department recently announced that housing starts rose 10.5% last month to an adjusted annual rate of 598,000, giving positive price support to the SPDR S&P Homebuilders ETF (XHB), the iShares Dow Jones Home Construction (ITB) and the PowerShares Dynamic Building/Construction ETF (PKB).  

In general, housing starts are an important indicator of activity in the real estate markets and as starts increase, future construction generally remains healthy.  However, the opposite in this recent surge in new home construction is likely to prevail due to supply and demand imbalances and eventually hinder the real estate markets. 

An excess of supply is likely to be seen in the coming months as the massive number of home foreclosures, repossessions and properties sitting on bank’s balance sheets are expected to hit the market.  This imminent surge in supply is anticipated to push inventories of existing homes close to 12 months, if not even higher.  Read more of this post

Three ETFs Influenced By Obama’s Public Works Plan

In yet another attempt to bolster the US economy, President Obama and his administration used the long weekend to unveil a public works plan that emphasizes on transportation and infrastructure, potentially influencing the iShares Dow Jones Transporation Average (IYT), the PowerShares Dynamic Building & Construction Portfolio (PKB) and the PowerShares DB Base Metals (DBB).

This latest plan is estimated to cost as much as $50 billion over the next six years and includes rebuilding nearly 15,000 miles of road, constructing nearly 4,000 miles of railway, revamping airport runways and moderninzing the air traffic control system.  Additionally, President Obama called for an “infrastructure bank” which would focus on funding regional transportation upgrades. Read more of this post