Homebuilders Defy Depressed Housing Market

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Although the housing market is still in the doldrums, you wouldn't know it looking at the performance of home building stocks.

The SPDR S&P Homebuilders (NYSEArca: XHB) are ahead by 2.65% this year after recording gains of 17.40% and 27.60% in 2010 and 2009. Other ETFs tied to the homebuilding sector like the iShares Dow Jones U.S. Home Construction Index Fund (NYSEArca: ITB) have followed suit. Is this a sign of a bull market in the homebuilding sector? Is the worst over? 

A gander at the activity in residential real estate paints a more realistic picture of what's really occurring. 

New home sales during the month of February fell to levels not seen in 50-years. According to the National Association of Realtors, first time home buyers accounted for just 31% of new home purchases over the past two months. Put another way, finding new home buyers with such a weak job market and fragile economy has been tough going.

A home buyer tax credit and the U.S. Treasury's purchase of $142 billion in federal agency mortgage-backed securities were tried to revive the housing market, but with limited success. The home buyer tax credit expired last year and the Treasury will start selling its mortgage-backedsecurities. Now everyone will get to see how the housing market acts without government programs designed to keep it afloat.

Lennar Corp. ( LEN ) and KB Home ( KBH ) are expected to report earnings this week and it won't be pretty. Both companies are likely to report a drop from last year in both earnings and revenue for the reporting quarter.   



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: KBH , LEN

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