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Homebuilder ETFs Await Housing Data, Earnings

tlydon@globaltrend.com (Tom Lydon)

Homebuilder exchange traded funds could see action this week as investors digest earnings reports as well as updates on home prices, new home sales and pending sales.

On Tuesday, markets will get the S&P/Case-Shiller report on May home prices as well as June new home sales. Pending home sales for June are released on Thursday

In sector earnings, PulteGroup (NYSE: PHM - News), D.R. Horton (NYSE: DHI - News) and Meritage Homes Corp (NYSE: MTH - News) are all set to report this week.

Home sales tend to drop off in the summer following the key spring season. Although interest are low and affordability metrics have improved, the housing market remains sluggish. The Commerce Department is expected to report new  home sales for June, and analysts expect the number to have risen to 322,000, from 319,000 the previous month, reports Ashwin Seshagiri and Jeff Kearns for Bloomberg .

“The key to any kind of industry recovery is really about demand, not really about supply,” said Richard Dugas, chief executive of PulteGroup.

Investors are also looking ahead to Thursday’s pending home sales report. The housing downturn is in its fifth year after the bubble burst. [ Builder ETFs in Focus on Pending Home Sales Report. ]

“Weak demand is the key reason sales are down,” Patrick Newport, an economist with IHS Global Insight, said in a report. “Buyers are worried about falling house prices, the job outlook, and now, about the debt ceiling.”

Builders are scaling back in a tough market, analysts say.

“After builders halted the freefall in their community counts in 2009, they shifted quickly to turnaround mode during the tax credit period of 2010,” said Nishu Sood at Deutsche Bank. “But after watching demand fall apart post the tax credit, community count growth has leveled off at a tepid pace. The roughly 1% sequential pace of growth the past three quarters is reflective of the extreme caution with which builders are once again approaching new land investments.”

SPDR S&P Homebuilders (NYSEArca: XHB - News) and iShares Dow Jones US Home Construction (NYSEArca: ITB - News) invest in homebuilders and related housing stocks.

SPDR S&P Homebuilders

Tisha Guerrero contributed to this article.