Terrible Housing Data Sends Homebuilders ETF Higher?

Sales of new homes in May fell to the lowest level ever, so why did the Homebuilders ETF close higher on Wednesday.

The data could not have been more bearish.

The Commerce Department said on Wednesday single-family home sales tumbled to a 300,000 unit annual rate, the lowest level since the series started in 1963.

What happened?

It was short covering, according to Nishu Sood of Deutsche Bank.

"We're not going to get a headline print much worse than this," he says. "It was definitely lower than anyone I talked to expected. This was short covering."

What's next?

"The housing market is on its own now that the tax credit expired," explains Sood. "The hope is that an improving employment market will drive demand."
But Sood doesn't see it playing out well.

"Typically housing rallies when an economy stops losing jobs and that's already happened," he says.

What's the trade?

The name I like in the space is MDC but it's a land fund more than a homebuilder, says Sood.

In the space, I like Home Depot , says Guy Adami.

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