(Housing article updated for mid-day price movement in D.R. Horton, Lennar, and other homebuilder stocks.)

WASHINGTON D.C. (

TheStreet

) -- A reversal in last month's disappointing housing starts and building permits was pushing homebuilder shares much higher on Wednesday afternoon.

While homebuilders may slouch toward recovery due to the high level of foreclosures and the already over-levered U.S. consumer, the market seemed positive on the sector after both housing starts and building permits increased significantly in November.

Two of the most distressed homebuilders were up the most on Wednesday.

Orleans Homebuilders

( OHB), which recently put up a

for-sale sign on the Orleans Homebuilders property was gaining 10% in the early afternoon.

Hovnanian Enterprises

(HOV) - Get Report

,

expected by analysts to provide another poor earnings report after the close today, was up the most in the sector, with a more than 11% gain.

KB Home

(KBH) - Get Report

was third among homebuilder stocks with a 6% gain and close to one million shares above its average daily volume traded by the early afternoon.

Shares of

Lennar

(LEN) - Get Report

and

Pulte Homes

(PHM) - Get Report

were up 5.5% each for the other largest gains in the homebuilding sector.

Elsewhere,

D.R. Horton

TST Recommends

(DHI) - Get Report

was up 4.8%, while

M.D.C. Holdings

(MDC) - Get Report

was up 3.3%.

Ryland Group

(RYL)

was up 2.9% in the early afternoon.

The latest housing starts and residential building permits data for November showed a month-to-month uptick in activity, but a considerable year-over-year decline.

Building permits of 584,000 in November were up 6% from October's 551,000, but 7.3% below a year ago.

Housing starts of 574,000 were 8.9% above the October level, but down 2.4% from last November's 665,000. Economists had forecast had a gain of 8.5% compared with October.

The tax credits implemented by the government, as well as historically low interest rates, were expected to drive the housing starts and building permits data up again in November.

Market observers are viewing the most recent data as further proof of stabilization in the U.S. home market. The extension of the first-time home-buyer tax credit, which was set to expire in October, has spurred activity at the low-end of the housing market.

However, some analysts who cover the homebuilding sector argue that at a time when the foreclosure pipeline is still huge and the lending market crippled, reading too much into housing starts data is a mistake, as the macroeconomic picture related to job growth may ultimately be more important to the homebuilders' 2010 fortunes.

Single family housing starts and building permits were both up versus October, 2.1% and 5.3% respectively.

Housing completions were higher by 8.7%, but single family housing completions, in particular, were flat versus October.

-- Reported by Eric Rosenbaum in New York.

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