Homebuilder Stocks Stoked Over Data

Got homebuilder stocks?

The builders were stoked Tuesday as conditions and incentives sent pending home sales much higher than expected. The National Association of Realtors expects even greater pending sales activity in the months to come, but economists caution that not all of the pending sales are closing.

The pending home sales index rose 6.7% to 90.3 in April from 84.6 in March, the largest increase in more than seven years and the third consecutive monthly increase, according to the NAR. It was far better than an expected 0.5% increase and 3.2% higher than a year prior.

Pending sales, which indicate that a contract has been signed but the transaction hasn't been closed, got a boost from more affordable housing, low mortgage rates and the impact of the $8,000 first-time buyer tax credit, said Lawrence Yun, NAR chief economist, in a statement.

The news propped up housing stocks, sending the S&P Homebuilders Select Industry Index 3.2% higher. Toll Brothers(TOL Quote) added 3.9%; KB Home(KBH Quote) tacked on 2.7%; Pulte Homes(PHM Quote) climbed 3.5%; Centex(CTX Quote) gained 2.9%; and Lennar(LEN Quote) rose 1.4%.

Also, Hovnanian(HOV Quote) added 8.6% and DR Horton(DHI Quote) climbed 4.1%.

"[Pending home sales] were rather strong -- a lot stronger than anticipated -- and it's consistent with most of the economic data that things are improving," says Peter Cardillo, chief market economist for Avalon Partners. "In this particular case, it's on the plus side, which is good."

It certainly looks good, agreed Brian Bethune, chief U.S. financial economist at IHS Global Insight, "but the actual existing-home sales haven't really done much, so that leads me to believe that perhaps people just aren't getting approved for mortgages or there are more delays going through the process."