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Builder ETFs Sell Off on Pending Home Sales Decline

tlydon@globaltrend.com (Tom Lydon)

Exchange traded funds tracking homebuilders and housing stocks dropped about  4% on Wednesday after a report estimating U.S. pending home sales saw an unexpected decline last month.

SPDR S&P Homebuilders (XHB - News) and iShares DJ US Home Construction (ITB - News) were sharply lower on the news.

The National Association of Realtors said its pending home sales index fell 5.5% in April to the lowest level of 2012. Also, the figures for March were revised lower.

Economists polled by Reuters had expected a slight gain in April pending home sales.

Wednesday’s homebuilder sell-off pushed XHB back below its 50-day simple moving average.

Still, builder ETFs have been stellar performers in 2012 with XHB posting a year-to-date gain of about 26% as of May 29.

“The housing market has been one of the U.S. economy’s weakest links as it recovers from the 2007-09 recession, but many economists think the sector will actually add to economic growth in 2012 for the first time since 2005,” Reuters reported. “The report on pending contracts in April could temper some of that optimism.”

SPDR S&P Homebuilders