The S&P/Case-Shiller Home Price Index of 20 metropolitan areas showed a seasonally-adjusted gain of 0.8 percent in February from January and 12.9 percent from the previous year.
But, that gain was based on the sale of fewer homes, according to David M. Blitzer, chairman of the committee at S&P Dow Jones Indices which administers the index. He said several factors are pointing to a frail housing market.
"Despite continued price gains, most other housing statistics are weak," Blitzer said in a statement on Tuesday. "Sales of both new and existing homes are flat to down. The recovery in housing starts, now less than one million units at annual rates, is faltering. Moreover, home prices nationally have not made it back to 2005. Mortgage interest rates, which jumped in May last year and are steady since then, are blamed by some analysts for the weakness. Others cite difficulties in qualifying for loans and concerns about consumer confidence. The result is less demand and fewer homes being built."
Steve Cortes, founder of Veracruz TJM, said Blitzer doesn't go far enough to describe the state of the housing market.
"I think that he's being too tepid to say that it's weak," Cortes said. "I think that it's very weak to extremely weak."
Cortes cited recent U.S. Census data showing homeownership rates have fallen to 64.8 percent, a 19-year low. Though household formations have declined slightly in the past decade, Cortes found it troubling that near-record low interest rates haven't been enough to encourage more homeownership.
That could translate as long-term bad news for homebuilder stocks.
"When low rates can't convince people to buy homes, I think what you have is a structural problem," Cortes said. "This kind of secular change in the housing market means that housing stocks will do worse from here."
Richard Ross, global technical strategist at Auerbach Grayson, was also bearish on homebuilders, particularly the iShares US Home Construction ETF (the ITB) based on the technicals.
"Some of those bearish fundamental data points are starting to filter their way into the technicals," said Ross, a "Talking Numbers" contributor.
Ross saw a head and shoulders pattern that formed over the past five months. The ETF's price has broken below the pattern's neckline and is now hovering around its 200-day moving average. That head and shoulders pattern is actually part of a larger bearish double top formation that began in middle of 2012.
"You don't need to be a technician to recognize the importance of a very bearish double top at the tail end of a very strong move," Ross said. "That concerns me. In fact, support for that pattern is down around the $20 level. That's $3 from here. It's a $23 ETF. You do the math. It's not a pretty picture."
To see the full discussion on housing and the homebuilders ETF, with Sanchez on the fundamentals and Ross on the technicals, watch the above video.