Too Early To Buy Homebuilders ETF

House prices in the U.S. are tumbling. Jobs are disappearing. Retail sales are plunging. But mortgage rates keep going up. The rate on Jumbo mortgages just hit a new 52-week high of 7.84%, a percentage higher than a year ago and two percentage points higher than three years ago.

The 15-year and 30-year fixed-rate mortgages, at 6.12% and 6.38%, are near their 52-week highs and above levels one and three years ago. The same goes for the 5-year adjustable rate mortgage, now at 6.03%.

Mortgage rates have to come down if housing is going to recover. And that’s why it’s probably still too early to buy into the SPDR S&P Homebuilders (XHB) exchange-traded fund even though it’s looking cheap after hitting an all-time low in recent days (some 60% below the all-time high two years ago). Moreover, the recession is just getting started and job losses look like they are gaining momentum. This ETF could get cheaper – especially if all those redemptions finally induce Legg Mason’s Bill Miller and other value types to stop buying and — dare we say – start forced selling.

Update on the explore part of portfolio: That’s enough exploring. Around the middle of today, during trading hours, I cut losses on the Horizon BetaPro 60 Bull Plus (HXU) fund at 5%.