Good News: Home Builders Nab Tax Credit

A new tax credit for first-time homebuyers is offering some soft padding for an otherwise murky week in the housing sector.

Shares of some housing stocks rallied on Friday, after the government announced that thousands of first-time homebuyers can receive a new $8,000 tax credit before they complete their taxes, making it easier for people to buy homes.

The largest home builder, D.R.Horton(DHI Quote), saw a 5% jump to $9.14 in afternoon trading, Lennar(LEN Quote) jumped 6% to $9.41, KB Home(KBH Quote) increased 4.5% to $14.98 and Toll Brothers (TOL Quote) rose 5% to $18.35.

The Federal Housing Administration said borrowers who use an FHA loan will now be able to get advances from lenders, instead of waiting for the tax credit, for closing costs or a larger down payment. The FHA will still require a 3.5% down payment from borrowers, unless they work through a state or local housing program.

The tax credit for first-time homebuyers was included in the economic stimulus package signed by President Barack Obama in February.

Still, the rest of the week was awash in disappointment.

On Thursday, the government said new home sales in the U.S. were nearly flat last month at 3520,000 units sold. Economists had predicted a sales pace of 360,000 units.

The National Association of Realtors also reported on Wednesday that while existing home sales grew 2% in April, home prices continued to fall, and unsold home inventory grew.