Two Homebuilder ETFs, Two Very Different Returns

Could 2014 be the year for homebuilder ETFs? They've bounced back after lagging the S&P 500 last year, with the Bloomberg Americas Home Builders Index up 8 percent in the past month, double the S&P 500's gain.

The surge started in mid-December when the Fed said it would start tapering bond purchases by $10 billion a month. That was viewed as a sign that the economy is improving and that interest rates will stay at least moderately low. In addition, average job growth in markets served by public homebuilders is growing 2.2 percent, faster than the 1.6 percent job growth for the overall economy -- a favorable demand indicator, according to Bloomberg Industries’ Drew Reading. The two big homebuilder ETFs that investors have to choose from vary greatly, however, in the industry exposure they provide -- and the returns they generate.