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Housing Stocks Volatile after Mixed Data

New home-pricing data out today was decidedly mixed. Judging by how housing stocks are responding, investors don’t seem to know which data to react to.

XHB and ITB – the two ETFs that track housing stocks – have been up and down all morning, alternating between flat and half a percent up.

The good news is that home prices rose 8.1% in January, according to the S&P Case-Shiller Home Price index. That’s the largest year-over-year increase since June 2006, before the housing bubble burst.

The bad news is that new-home sales fell 4.6% in February after increasing 13.1% in January. The 411,000 units sold fell short of the 431,000 units sold in January. Economists were expecting 422,000 new homes to be sold.

Given the conflicting reports, it’s easy to see why housing stocks have seesawed all morning. On one hand, the big increase in home prices is the latest validation that we’re in the midst of a housing recovery. On the other, a drop-off in home sales shows that trepidation still remains among home buyers.

With ITB and XHB up 11% and 9.5%, respectively, in 2013, the slower February sales may ultimately slow the recent run-up in housing stocks – especially with the market as a whole long overdue for a correction.

Long term, however, January’s strong home-price increase should provide more fuel for a housing recovery that has been gathering momentum for months.

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