As earnings season kicks into high gear for homebuilders this week, investors will be looking for hints of whether the real estate boom can possibly continue into 2006. A swarm of data comes out this week on housing sales, consumer confidence and corporate earnings, but trying to decipher what it all means for builders' future remains an arduous task.

For two years now, pundits have been predicting the U.S. real estate bubble would deflate and homebuilder shares would tank. The market is looking to see if now might be the right time for the collapse, given rising interest rates, escalating gas and home heating oil prices, high household debt and shaky consumer confidence.

Major builders reporting results this week include

Centex

(CTX)

and

Meritage

(MTH) - Get Report

on Tuesday,

Pulte

(PHM) - Get Report

on Wednesday, and

Standard Pacific

(SPF)

on Thursday.

But for investors, third-quarter results seem to be of little importance, unless companies miss estimates. Last week,

NVR

(NVR) - Get Report

rattled the sector with its

disappointing earnings, while positive earnings from

Ryland

(RYL)

and

MDC Holdings

(MDC) - Get Report

failed to boost the group.

The question on the market's mind is what happens to the sector in 2006 and 2007. Builders have record backlogs of homes ordered but not yet delivered, which will contribute to some of their future earnings. However, inventories are rising in certain markets and price increases are easing, leaving many to wonder how much growth is left in the industry, becasue year-over-over comparisons are going to soon get very difficult for builders.

"As the consumer gets pressured from a variety of places, we believe 2006 will be a much tougher environment for builders to get pricing power," wrote Susquehanna Financial Group analyst Stephen East in a recent research report. "It will still occur in select markets but we believe the days of relentless price hikes are done."

Last week, Banc of America Securities analyst Daniel Oppenheim

downgraded the entire homebuilding sector and said he expects the group to report 11% earnings per share growth in 2006, down from his prior 15% estimate.

A string of data this week on housing sales and consumer confidence will only add to the endless speculation about where the U.S. housing market, and the builders, are heading.

On Tuesday morning, existing home sales data will be released by the National Association of Realtors. "We will be watching inventory closely to see if it continues to rise above the most recent reading of 4.7 months supply, the highest since November 2003," wrote Friedman Billings Ramsey analyst Craig Kucera in a recent report. That threshold also should also be watched when new home sales data comes out from the Census Bureau Thursday morning. Inventory of new homes also rose to 4.7 months in its recent reading, the highest level since June 2000.

Also Tuesday morning, the Conference Board releases its latest Consumer Confidence Index reading. Last month, Hurricane Katrina woes helped push the board's index to its lowest level since October 2003.

However, while just about every confidence category fell from August to September, consumers' plans to buy a home within the next six months remained the same, according to the Conference Board. The market will look to see if consumers have changed their attitudes toward housing affordability, now that the rate on 30-year fixed rate mortgages has topped 6%.

All in all, expect another volatile week for any housing-related news. Builders have seen their shares react wildly to any piece of data that suggests the bubble is bursting, and this week should be no exception.