Housing Bust Taking Its Toll On Homebuilders ETF

Expect a downward trend for homebuilder ETFs. According to D.R. Horton (DHI) President Donald Tomnitz, the homebuilding market "is going to suck, all 12 months of the calendar year".

In addition, his prediction is that new-home prices will continue to decline due to the inventory still on the market. Joanne Von Alroth for Investor's Business Daily reports that Horton's own production is down 35% in 2007 from last year, from 40,000 houses to 26,000.

DHI makes up nearly 5% of the SPDR S&P Homebuilders (XHB). XHB is down 9% for the year.

Other news in the industry has not been promising, as subprime lender New Century Financial (NEW) announced it didn't have enough cash to pay creditors. The good news is a rebound should build up over the next few years.