Best ETFs to Play Housing Boom
Not all housing exchange-traded funds are created equal, Paul Baiocchi of IndexUniverse.com said Thursday.
"ITB is the better choice," he said. "It's a cap-weighted portfolio, so you get the biggest exposure to the biggest home builders. Sixty-two percent of the portfolio is in homebuilders."
ITB is the symbol for the iShares Dow Jones U.S. Home Construction Index Fund.
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"XHB is equally weighted," he said. "Not only do you get diluted exposure to home builders in that portfolio. You also get exposure to things like Bed Bath & Beyond and La-Z-Boy, which we don't think really believe belongs in a home builders portfolio. Both are imperfect ways to play home building, but if we had our money it'd be ITB."
When looking at real-estate investment trusts, Baiocchi said that iShares FTSE NAREIT Residential Plus Capped Index Fund had more exposure to residential real estate – about 44 percent.
The Vanguard REIT ETF, by comparison, had 17 percent of its holdings in residential property," Baiocchi said.
"You're going to get more commercial real estate investment trust exposure," he added.