“I think for the short term the people who have the cash will have the advantage. Over the longer haul, I think it will even out. I think the recovery is uneven,” says Howard.

(Read More: Is Multi-Family HomeConstruction Overheating?)

The first builder to report Monday is Virginia-based NVR, with Ryland, Pulte and D.R. Horton continuing through the week. Analysts say Texas-based D.R. Horton, whose stock has recently outperformed its peers, is the one to watch, a bell weather for the group.

“They are the largest builder in terms of the number of closings, and they are in the most markets, so they will probably be able to tell us not only about orders, but also about other things that are important to folks now, like what are material prices doing, how are you negotiating with suppliers,” notes Megan McGrath, an analyst at MKM Partners.

Most of the big builders have seen dramatic growth in new orders, as first time home buyers slowly come back to the market. These buyers are facing stiff competition from all-cash investors in the existing home market, and are therefore looking to new builds. D.R. Horton is an entry-level builder, but has been able to shift product to move-up buyers when the demand is there. Move-up buyers have been moving out of the market of late, despite the overall housing recovery and rising values.

“I think the recovery we’re seeing right now is first-time buyer and the very high end of the market. The move-up buyer has not really shown up as of yet, and if you want to see a very strong recovery in housing we need to see the move-up buyer playing a more prominent role than they are today,” says Richard Smith, Chairman and CEO of Realogy Holdings Corp.

Monthly readings on new and existing home sales are also out next week and will offer more insights into the current strengths and weaknesses of the housing recovery in this crucial Spring season.

(Read More: What’s Holding Up City Home Prices? Boomers)

“In a worst-case scenario, confidence could weaken further and housing starts could mark time,” says Paul Diggle of Capital Economics. “But by far and away the most likely outcome is that the construction industry’s growing pains are overcome and homebuilders break ground on many more sites over the next few years.”

Article source: http://www.cnbc.com/id/100656470

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It’s one thing to jump on the bandwagon when things are getting better, it’s quite another to jump off of it when everyone around you, not to mention your own company’s earnings, would seem to confirm that sentiment. But that’s just what Donald J. Tomnitz, CEO of D.R. Horton

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“I still don’t see a lot of jobs being created,” he told an earnings conference call, sending his company’s stock down when it should have been riding higher on a 24 percent year-over-year jump in new orders for homes. He is concerned about the future of this fledgling housing recovery, and he has reason to be. Mortgage delinquencies and foreclosures are driven by unemployment.

The homebuilders are rising from the ashes, after overbuilding and a credit crash sent sales and construction to levels not seen economists began counting all those numbers; they are rising, but not necessarily thriving. While overall buyer demand has been weak, distressed properties (foreclosures and short sales) have stood as the greatest competition, as many of those homes are in fact relatively new construction.

The good news is that mortgage delinquencies are falling, down to 5.41% of all mortgages outstanding in Q3 of 2012 from 5.88% a year ago, according to a new report from TransUnion.

“Continued declines in mortgage delinquency rates are a welcome sign and reflect that relatively more homeowners are able and willing to make their mortgage payments each month,” said Tim Martin, group vice president of U.S. Housing in TransUnion’s financial services business unit. “However, we still have a long way to go to reach more ‘normal’ conditions of a delinquency rate in the 1-2 percent range for the U.S. average.”

(Read More: Let Real Estate Help Pay for Retirement)

The recovery, like all real estate, is becoming increasingly local, with the hardest hit markets, like Arizona and California recovering faster than New Jersey and Illinois. One disturbing finding from TransUnion: 49 percent of metropolitan areas saw quarterly improvement in their mortgage delinquency rates in Q3, down from 76 percent in Q2 and 73 percent in Q1.

The reason areas in Arizona, Nevada and California are improving so dramatically is because of high investor demand. Investors have driven supplies of distressed properties there so low that those markets are now seeing double digit home price increases. Even those higher prices are not driving investors away because there is still so much rental demand that rents are rising.

“Nationally, rental leasing volumes were up sequentially every month during the last two years,” according to CoreLogic’s November ‘MarketPulse’ report. “Over this same period, an average of 42,000 rentals were added to the stock of rental homes each month. This is more than twice the average flow that the U.S. was experiencing prior to the housing recovery.”

This investor-fueled recovery helps in the short term, but in the long term housing needs to be driven by a healthier economy, income growth and consumption and rising home prices, according to CoreLogic.

(Read More: Home Depot Raises Outlook as Housing Market Improves)

“We are in the second inning,” said Ara Hovnanian, CEO of Hovnanian Enterprises
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Too much uncertainty in the economy lies ahead, and housing lies in the balance.

Sector Watch: U.S. Homebuilders

—Toll Brothers
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—DR Horton
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—Hovnanian Enterprises
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—PulteGroup
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—Ryland Group
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—Lennar Corp
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—Beazer Homes USA
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—Meritage Homes
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—KB Home
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Questions?  Comments?