(Homebuilders story updated for closing prices.)
NEW YORK (
) -- The homebuilding sector experienced a broad rally Tuesday on the third-consecutive monthly increase in U.S. existing home sales.
The National Association of Realtors' monthly report for November showed a 7.4% increase in existing home sales to a two-year high of 6.5 million units.
The pace of the increase slowed in November from the 10% clip reached in October, when the then-looming expiration of tax credits (which have since been extended) pushed first-time home buyers into the market.
The housing market has headed into the seasonally slow holiday and winter months, and the National Association of Realtors noted in its monthly report that it doesn't expect home sales to post gains at the November level until spring.
Nonetheless, homebuilder shares rose sharply Tuesday.
Whether the short-term spike is justified is an open question. Just last week, improved monthly housing starts and building-permit levels
sparked a rally in homebuilder shares -- including
. But investors quickly gave back those gains a day later, following a negative jobless-claims report.
The industry's biggest stock-price gainer Tuesday was KB Home, whose shares rose 6.9%.
finished Tuesday up 4.7%. Luxury builder Toll Brothers ended Tuesday up 4.5%.
, which like KB Home has a big concentration in the bellwether California residential market, rose 4.3% on Tuesday.
In California, home prices have recently increased while foreclosure levels have declined, but the
jury is still out on whether these positive trends are long-term or artificial spikes.
The outperformance by KB Home on Tuesday was
in stark contrast to KB Home's decline last week after its CFO abruptly left the homebuilder.
The Ryland Group
was up 4% on Tuesday, while D.R. Horton added 3.8%.
Even the most embattled homebuilders,
, were up marginally by the end of trading on Tuesday.
Hovnanian recently released another bleak earnings report, while Orleans, struggling under a serious debt load, is considering a sale.
-Reported by Eric Rosenbaum in New York.
Follow TheStreet.com on
and become a fan on
Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.