[ad#Google Adsense 336×280-IA]This week, we’re tackling what’s been one of the most depressing areas of the market for years – residential real estate.

Ironically, though, we have some good news to share. So let’s get to it…

Inventory Keeps Slip Sliding Away

The latest stats from the National Association of Realtors reveals that the inventory of homes listed for resale is declining. A lot.

In fact, last month the number hit the lowest level since September 2005, making it the eighth consecutive month of year-over-year decreases.

So what explains the drop?

Well, homeowners could simply be giving up on selling their houses in the face of such a crappy market. (The latest S&P/Case-Shiller home prices index reveals that prices dropped another 3.8% in the last year.)

Then again, foreclosure delays and banks holding back inventory could be another explanation.

Regardless of the cause, though, a drop in supply is a drop in supply. And it means less competition for new homebuilders.

Or as Captain Obvious, I mean Citigroup analyst, Josh Levin, put it, “Declining inventory is bullish for the homebuilder stocks.”

Indeed it is!

The SPDR S&P Homebuilders ETF (NYSE: XHB), which invests in 36 housing-related stocks, is up 38% off its October lows.

Bottom Line: Let’s not beat up on Levin too much. He did uncover what is, in his words, “the most interesting thing you may not know about the housing market.” And it’s certainly a trend worth tracking. Because if the inventory declines continue, it should lead to significant upside for homebuilding stocks.

Ahead of the tape,

— Louis Basenese

[ad#jack p.s.]

Source:  Wall Street Daily