Talking Numbers

Hold off on home builders: Analysts

Talking Numbers

Pending home sales are down. What does that mean for home builder stocks and the tracking ETF, the XHB?

US Pending home sales dropped sharply in September, with the index falling to its lowest level in nine months. According to its creator, the National Association of Realtors:

"The Pending Home Sales Index, a forward-looking indicator based on contract signings, fell 5.6 percent to 101.6 in September from a downwardly revised 107.6 in August, and is 1.2 percent below September 2012 when it was 102.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings."

(Watch: Pending home sales drop 5.6 percent in September)

The real estate brokerage organization expects lower home sales for the rest of 2013 and a flat 2014. They're blaming it all on higher interest rates. Interest rates moved higher over the summer during a massive bond selloff in anticipation of the Fed tapering its $85 billion per month bond-buying operations.

The latest pending home sales number sent shares of the related SPDR S&P Homebuilders ETF (the XHB) down 0.35% Monday. The XHB consists of home builders but also appliance manufacturers like Whirlpool and retailers like The Home Depot.

What should these numbers mean for the housing recovery and is it a good idea to buy the XHB at these levels?

(Read: Homebuilder's fall on drop in pending home sales)

On CNBC's Street Signs' Talking Numbers segment, CNBC contributor Zachary Karabell, president of River Twice Research, looks at the fundamentals of the housing sector. On the XHB's charts is Carter Worth, Chief Market Technician at Oppenheimer.

Watch the video above to see if the XHB is worth building into your portfolio.

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