Stephen Kim, an analyst at Citigroup, is looking for a turnaround in the residential housing market by the end of 2007.
He says the sector is cyclical, and the stocks typically bottom out a year in advance of the fundamentals.
“Certainly a two-year downturn is nothing that we haven’t seen in this industry,” Kim said on CNBC’s "Closing Bell."
Kim says new home cancellations have been high for the last six months, but are beginning to decline as buyers’ confidence grows. He expects the market to turn positive in the second half of the year after the steep decline that came during the third quarter of 2006.
Stocks in the sector include Toll Brothers, D.R. Horton, Hovnanian Enterprises and Pulte Homes.