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Can Housing ETFs Remain Red-Hot in 2021?

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Housing is one of the few red-hot areas of 2020 that has remained strong this year. Record low mortgage rates and migration from cities to suburbs are among the main reasons for the housing boom.

Pandemic fueled demand sent 2020 existing homes sales to their highest level since 2006, according to the National Association of Realtors. While sales of existing and new homes were down slightly in in February, many believe that those drops were probably due to bad weather.

The current housing rally is more stable than the previous one as buying is being driven by real demand rather than speculation. Further, lending standards are tighter, and buyers are putting down more cash.

The most popular homebuilder ETF--the iShares U.S. Home Construction ETF (ITB - Free Report) --is a market cap weighted ETF of home construction and related stocks. It is top heavy with four holdings D.R. Horton (DHI), Lennar (LEN - Free Report) , NVR (NVR - Free Report) and PulteGroup (PHM - Free Report) accounting for almost 45% of the portfolio.

The SPDR S&P Homebuilders ETF (XHB - Free Report) , is an equal-weighted ETF that includes building-products and home-furnishing companies as well in addition to homebuilders. Williams-Sonoma (WSM - Free Report) , RH (RH - Free Report) and Home Depot (HD - Free Report) are among its top holdings.

To learn more about these ETFs, please watch the short video above.

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Disclosure: Neena owns shares of XHB in the ETF Investor Portfolio.