Homebuyers are rushing into the market as the spring selling season heats up. Existing home sales jumped 4.4% from February to an adjusted annual rate of 5.71 million in March--their strongest pace in a decade. This was much better than the economists’ estimate of a 2.2% gain to 5.6 million. Sales were particularly strong in the Northeast and the Midwest regions. 

“Bolstered by strong consumer confidence and underlying demand, home sales are up convincingly from a year ago nationally and in all four major regions despite the fact that buying a home has gotten more expensive over the past year," according to the National Association of Realtors.

Improving jobs market, rising wages and low interest rates have supported the housing market even though the inventory remains low and prices have been rising. However, with completions of new homes up 3.2% compared with last month and 13% year-over-year, housing market could see some easing in supply shortages.

While rising prices have been a concern, the recent decline in mortgage rates has improved affordability and could further boost the housing market.

With the key spring selling season off to a strong start, investors should take a look at housing ETFs that have been outperforming the market this year.

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A Deeper Dive into Housing ETFs

From their names, the iShares Dow Jones US Home Construction ETF (ITB - Free Report) and the SPDR S&P Homebuilders ETF (XHB - Free Report) sound pretty similar. However, if you look deeper, these funds are quite different. 

ITB has approximately two-thirds of its portfolio allocated to homebuilders, 15% to building products companies and 7% to the home improvement retail. It is a market cap weighted product and leading names—DR Horton (DHI - Free Report) and Lennar (LEN - Free Report) —account for almost a quarter of total assets. It has an expense ratio of 43 basis points.

ITB has a Zacks Rank #1 (Strong Buy) and is up more than 17% year to date. It is quite popular with $1.5 billion in AUM.

XHB has heaviest allocation to the building products industry (35%), while exposure to homebuilders is a little less than 30%. It follows an equal weighting methodology for its 36 holdings.

So, with XHB, investors get a much lower exposure to homebuilding heavyweights but it could be a suitable option for investors who believe that home improvement/ remodeling companies will continue to do well even if home sales slow down.

XHB is slightly cheaper with an expense ratio of 35 basis points.  It is also ranked Zacks Rank #1 (Strong Buy) and is up more than 11% year to date. The product has about $1.1 in AUM.

Another ETF to consider is the PowerShares Dynamic Building & Construction Portfolio (PKB - Free Report) . It holds 30 companies that provide construction and related engineering services.

The fund has highest exposure to the construction materials (21%) and building products (21%) industries. NVR (NVR - Free Report) and PulteGroup (PHM - Free Report) are the top holdings as of now.

If you believe that the Trump administration may come out with a big infrastructure spending plan soon, then this is the right product for you. In fact, it had surged after the election but has underperformed this year, as the Trump trade unwound.

The product is a smart beta ETF that evaluates companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action, and value.

PKB is not as popular as the other two, with $306 in AUM. It is also more expensive with 63 basis points in expense ratio.

The product is currently Zacks Rank #2 (Buy) and is up more than 5% this year.