Are Housing Stocks Signaling a Pullback?

Tim Boyle | Bloomberg | Getty Images

The Dow Jones U.S. Home Construction ETF is booking its worst day in nearly four months – falling more than 4 percent – after August new home sales came in below expectations.

New home sales, or contracts signed, eased last month to 373,000, below economists’ estimates of an increase to 380,000, but well above the 292,000 print for the same time last year.

After rallying to a four-year high last week, the ITB has wobbled the past three days – losing 5.5 percent – as investors bet against the sector.

Despite today’s miss, housing appears to remain the one economic bright spot in the sluggish global economy. In fact, the ITB is one of the best performing exchange traded funds this year, up more than 60 percent – well outperforming the S&P 500, which is up about 14 percent.

Here’s a look at how the ITB’s top holdings are faring today and this year.

New home sales are considered a leading indicator because contracts are typically signed before building ensues. Workers need to be hired and materials need to be manufactured, transported, and warehoused before finally reaching the construction site.