UPDATE 1-U.S. homebuilder shares reverse losses

* Sales of previously owned homes down 27.2 pct

* DJ home construction index up 1.3 pct, S&P down 0.9 pct

(Adds analyst quotes, updates share moves, recasts)

By Helen Chernikoff and Rodrigo Campos

NEW YORK, Aug 24 (BestGrowthStock) – Shares of big U.S.
homebuilders reversed earlier losses during midday trading on
Tuesday after investors concluded the stocks had fallen enough
to become attractive short-term buys.

The PHLX housing index (.HGX: ) , which contains homebuilders
and others in residential construction, fell more than 3
percent at its session low, but was up 0.2 percent at midday.

“There’s not much for the shorts to do here,” said John
Schlitz, chief U.S. market technician at Instinet in New York.

Shares of D.R. Horton Inc (DHI.N: ), the largest U.S. builder,
were up 2.7 percent at $10.25 while shares of the No. 3 builder,
Lennar Corp (LEN.N: ), were up 1.1 percent at $12.86 per share.

Luxury homebuilder Toll Brothers Inc’s (TOL.N: ) shares were up
1 percent at $16.37. Wall Street anticipates a loss of 14 cents
per share when Toll reports its fiscal third-quarter results on
Wednesday.

But the long-term demand for new homes and their builders
remains bleak.

Homebuilder share prices had initially fallen on Tuesday
after the National Association of Realtors said sales of used
homes dropped a record 27.2 percent from June to an annual rate
of 3.83 million units.

Single-family supply reached a record 11.9 months in July,
according to a client note from Credit Suisse analyst Dan
Oppenheim. Lower home prices will follow, Oppenheim said.

“You could argue we don’t need a single home built in this
country because we have tons of vacant homes,” said Jody Kahn,
of John Burns Real Estate Consulting, which is based in Irvine,
California and advises homebuilders. “We don’t have enough demand
right now to be sustaining a dozen public builders.”

For a graphic click: http://link.reuters.com/bam86n

“The most worrying feature of the recent housing data is the
absence of evidence of any underlying improvement in sales,”
wrote Nigel Fault, IHS Global Insight’s Chief Economist. “All of
the action earlier this year appears to have been driven by the
tax credit.”

(Reporting by Helen Chernikoff, editing by Gerald E.
McCormick, Phil Berlowitz)

UPDATE 1-U.S. homebuilder shares reverse losses