Published On: Fri, Mar 25th, 2011

Why homebuilders may never fully recover

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NEW YORK (CNNMoney) — The housing market, to put it mildly, still stinks. But have homebuilder stocks finally hit bottom?

New home sales in February plummeted 17% from January to hit a record low. Year-over-year, sales were down 28%. Still, shares of PulteGroup (PHM) were up 3% Wednesday afternoon thanks to an analyst upgrade at Goldman Sachs. Rival builders Ryland (RYL), KB Home (KBH), Lennar (LEN) and MDC Holdings (MDC) were all flat to slightly higher as well.

It could be a good sign that builders are hanging in there despite more bad news about housing sales.

“I’m not saying you should go buy a house because nobody knows where prices are going,” said Ryan Detrick, senior technical strategist with Schaeffer’s Investment Research in Cincinnati. “But even though the data is terrible, builder stocks are holding up.”

Detrick said builders could be poised for big gains later this year since all it may take is just a whiff of positive news to drive them higher. He conceded this is a contrarian bet, however.

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