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) on Tuesday, Pulte ( PHM) 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) rattled the sector with its disappointing earnings , while positive earnings from Ryland ( RYL) and MDC Holdings ( MDC) 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.

Homebuilder Data to be Released this Week
Tuesday Wednesday Thursday Friday
10 a.m.: Existing home sales data released by National Association of Realtors After market close: Pulte Homes (NYSE: PHM) reports earnings 10 a.m.: New home sales data released by Census Bureau After market close: Brookfield Homes (NYSE: BHS) reports earnings
10 a.m.: Consumer Confidence Index released by Conference Board After market close: Orleans Homebuilders (AMEX: OHB) reports earnings After market close: Standard Pacific (NYSE: SPF) reports earnings
After market close: Centex (NYSE:CTX) reports earnings Unspecified time: M/I Homes (NYSE: MHO) reports earnings
Unspecified time: Meritage Homes (NYSE: MTH) reports earnings

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