Construction ETFs Poised for Growth as U.S. Building Sector Accelerates

The construction industry continues to demonstrate considerable strength despite facing macroeconomic headwinds. As construction spending continues to expand, investors eyeing the sector have turned to construction ETFs as vehicles to capture this growth. Several funds tracking homebuilders and infrastructure projects have emerged as attractive options for those seeking exposure to the booming building market.

Understanding the Construction Sector’s Momentum

Recent data highlights why construction ETFs have attracted investor attention. U.S. construction spending has shown consistent growth throughout 2023, with total outlays climbing over successive months. The construction sector’s resilience stems from multiple factors across both residential and commercial segments. Single-family homebuilding has driven much of the residential construction gains, benefiting from ongoing demand despite inventory challenges. Meanwhile, the nonresidential sector has expanded steadily, with manufacturers and infrastructure projects fueling growth in areas such as power generation, highway improvements, and transportation networks.

What’s particularly noteworthy is that builders have navigated this period without severe cost pressures. Construction material prices have remained relatively stable year-over-year, providing a favorable backdrop for homebuilders and construction companies. This combination of demand growth and controlled input costs creates an attractive environment for construction ETFs.

Four Construction ETFs Worth Evaluating

For investors considering exposure to this sector, several funds offer distinct approaches to capturing construction and homebuilding opportunities.

SPDR S&P Homebuilders ETF (XHB)

This fund tracks the S&P Homebuilders Select Industry Index, providing concentrated exposure to the homebuilding subsector. The portfolio maintains diversification with no single stock comprising more than 4.16% of assets. The fund operates with a competitive expense ratio of 35 basis points, making it one of the more cost-effective construction ETFs in this category.

iShares U.S. Home Construction ETF (ITB)

This option utilizes the Dow Jones U.S. Select Home Builders Index, which isolates pure-play homebuilders from the broader household goods sector. Using a market-capitalization-weighted approach with free-float adjustments, ITB focuses specifically on the home construction portion of the U.S. equity market. The fund charges 40 basis points in annual fees, placing it in the mid-range for construction ETFs.

Invesco Building & Construction ETF (PKB)

For a broader construction perspective, this fund employs the Dynamic Building & Construction Intellidex Index, which encompasses the wider construction and building industry beyond just homebuilders. The index selection methodology emphasizes companies demonstrating fundamental growth potential, attractive valuations, and favorable timing factors. With no individual stock exceeding 5.26% of holdings and fees of 57 basis points, PKB offers slightly higher expenses but broader sector exposure through construction ETFs.

iShares U.S. Infrastructure ETF (IFRA)

This fund targets the NYSE FactSet U.S. Infrastructure Index, capturing companies with meaningful infrastructure exposure likely to benefit from elevated domestic infrastructure activity. With exceptional diversification—no holding exceeding 0.91% of assets—and the lowest expense ratio at 30 basis points, IFRA provides a more defensive construction ETFs option focused on long-term infrastructure themes.

Selecting the Right Construction ETFs for Your Strategy

Each of these construction ETFs serves different portfolio objectives. Investors seeking concentrated homebuilder exposure might prefer XHB or ITB, while those wanting broader construction sector representation could consider PKB. The infrastructure-focused IFRA appeals to longer-term investors betting on sustained government spending on public works. Comparing the fee structures—ranging from 30 to 57 basis points—reveals that construction ETFs offer cost-efficient ways to gain sector participation without picking individual stocks.

The resilience of U.S. construction spending, supported by residential demand and infrastructure investment momentum, suggests that construction ETFs may continue offering attractive opportunities for equity investors seeking exposure to this economically sensitive but currently robust sector.