(Home prices article updated with homebuilder stock movement and additional commentary.)
NEW YORK ( TheStreet) -- Stocks in the homebuilder sector moved higher Tuesday morning after a better-than-expected report from the S&P/Case-Shiller 20-city index of national home prices.
The index rose 4.4% in the second quarter, after a 2.8% drop in the first quarter. Economists had expected the index to rise just 3.1%, after
rising 4.6% in May. A
federal tax credit for homebuyers of up to $8,000 is largely credited with strengthening home sales this past spring as buyers rushed to push up their purchases before the credits expired April 30.
Homebuilder stocks fell at the opening bell but moved higher thirty minutes into trading. The SPDR S&P Homebuilders (XHB) and iShares Dow Jones US Home Construction (ITB), exchange-traded funds that tracks stocks in the homebuilder sector, rose 0.7% and 0.6%, respectively. Shares of NVR (NVR) and Lennar (LEN), among the XHB's top holdings, were 0.1% lower and 1.4% higher, respectively. Fellow builders D.R. Horton (DHI - Get Report), KB Home (KBH - Get Report), Ryland (RYL) and Meritage Homes (MTH) were all higher as well. Beazer Homes (BZH - Get Report) and Standard Pacific (SPF - Get Report) led the group in terms of share price gains, each rising 2.3%. Comstock Homebuilding (CHCI - Get Report) bucked the trend, falling 1.4%.The index of national home prices rose 0.3% month-over-month on a seasonally adjusted basis, better than the 0.2% increase expected, but slower than the 0.5% rise in May. Seventeen of the 20 cities measured in the index showed an increase in home prices, though a bulk of the uptick resulted from the pull-forward effect of the tax credits. The S&P/Case-Shiller 20-city index is a moving three-month average, so data for June was swayed by data from April and May. Home prices were up 6% nationwide since the April 2009 bottom, but remain 28% lower than their peak in July 2006. A lack of confidence among U.S. consumers will keep home prices from building back up to prerecession levels anytime soon, said David Blitzer, S&P's managing director and index committee chair, in an appearance on CNBC. He added that the ratio of home prices to income has gotten back to longer-term trends, suggesting home prices may not go up soon but will likely not go a lot lower either. "The worry starts when you remember that the Homebuyers' Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak," Blitzer said. The housing sector continues to be under tremendous pressure, and recent economic data indicated a long road ahead before the situation materially improves.