Homebuilders Stock Winners and Losers

NEW YORK, N.Y. ( TheStreet) -- Stocks in the homebuilding sector were mostly lower Tuesday afternoon despite a better-than-expected reading from the Standard & Poor's/Case-Shiller 20-city index of home prices.

The index rose 4.6% in May year-over-year, stronger than the 3.9% rise economists had expected. 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.

The SPDR S&P Homebuilders ( XHB), an exchange-traded fund that tracks the homebuilder sector, rose in morning trading only to reverse, losing 3.1% in late-afternoon activity. Shares of NVR ( NVR) and Lennar ( LEN), among the XHB's top holdings, bid down 1.7% and 2.6%, respectively. Fellow builders D.R. Horton ( DHI) and PulteGroup ( PHM) were down 0.9% and 1.5%, respectively.

A few select small-cap homebuilders managed to eke out share-price gains Tuesday. Standard Pacific ( SPF) gained 3.8%, Brookfield Homes ( BHS) 1.7% and Comstock Homebuilding ( CHCI) 1.7%.

The month of May is historically a strong month for home selling, regardless, as families looking to move get ready to do so in the summer months while their kids are out of school on summer vacations. Recent economic reports showed the housing market has a long way to go toward sustainable recovery, and many economists feel May's uptick in home prices will not continue through 2010.

"I bet in six months, 15 to 20 cities will have falling prices," said IHS Global Insight economist Patrick Newport, who expects home prices to fall between 6% and 8% before rebounding in 2011.

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Home prices rose 1.3% from April to May, according to the report released Tuesday morning, with 19 of the 20 major metropolitan cities measured reporting price increases. Las Vegas was the sole city to record lower prices in May; Minneapolis and Atlanta had the strongest month-over-month price growth.

Home prices fell 6.5% in Las Vegas year-over-year, and 0.5% month-over-month. Home prices in San Diego rose for the 13th consecutive month, rising 1.1% from April to May. The best performing cities year-over-year were San Francisco, where prices rose 18.3% from May 2009; and San Diego, where prices were up 12.4%.

Existing home sales fell at a slower-than-expected 5.1% in June to a seasonally adjusted annual rate of 5.37 million units, the National Association of Realtors said last week. Economists had expected the figure to come in at 5.18 million units, an 8.1% decline, compared with 5.66 million sales in May.

Then on Monday, the Commerce Department said sales of newly built homes rose 23.6% in June to a seasonally adjusted rate of 330,000, ahead of expectations. The figure came in ahead of expectations for a rate of 320,000 after a revised record-low rate of 267,000 units sold in May.

While any increase in the rate of home sales is seen as a good sign for the economy and housing market in general, June's uptick in new home sales still represented the second-weakest month on record after May's depressed figures. It was also 76.3% lower than the 1.4 million-peak in July 2005, at the height of the housing bubble.

The expiration of homebuyer tax credits April 30 led to a dramatic decline in demand for the month of May. Some of that weakening clearly spilled over into June, but not as severely as in the prior month.

The National Association of Home Builders said recently that its monthly index of homebuilder sentiment touched a 15-month low to a reading of 14 in June, from 16 in May.

-- Reported by Miriam Marcus Reimer from New York.

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