SPDR Homebuilders ETF higher on housing starts

SPDR Homebuilders ETF (XHB : NYSE : $17.29), Net Change: $0.10, % Change: 0.55%, Volume: 5,523,427

Breaking ground. Shares of home builders and home improvement retailers got a boost after U.S. housing starts rose more than expected and permits for new construction hit a five month high in the month of May. Housing starts increased by 3.5% to a seasonally adjusted annual rate of 560,000 units, making up nearly half of April’s decline. Construction was still down 3.4% over the prior year, but investors appear to be somewhat optimistic that the May data indicates the economic recovery, while slow, is continuing to progress.

Building permits increased by 8.7% to 612,000, indicating an improvement in future construction activity. One analyst said, “It’s a sign we had better weather in May. We also saw a big jump in permits with most of them in apartments. We are hearing a lot of apartment developers have projects in the works if they can get financing. There is perhaps a recovery in multi-family construction which is demand driven not due to tax incentives.”

Homebuilders D.R. Horton (DHI), Lennar (LEN) and PluteGroup (PHM) as well as retailers Home Depot (HD) and Lowe’s (LOW) all traded higher on the news.

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