The Institute for Supply Management came out with February numbers that homebuilders exchange traded funds (ETFs) aren’t going to enjoy.

Manufacturing contracted and construction spending fell again in February, and homebuilding fell for a record 24th straight month, reports Martin Crutsinger for Associated Press. Government building projects showed a slight gain in the month of February, but weakness is slumped throughout both homebuilding and non-residential activity. Overall, construction activity fell 0.3%.

Apparently the housing weakness will not turn around until the record glut of unsold homes is reduced, according to analysts’ predictions. The high energy prices and the credit crisis are adding to the problem.

An economist as Wachovia Securities said that he expects housing weakness to continue through the first half of this year, but growth should resume in the second half when the government tax rebates are distributed to 130 million households.

In trading today, both SPDR S&P Homebuilders (XHB) and

iShares Dow Jones US Home Construction (ITB) are up about 4%. The homebuilding sector, in fact, has staged something of a turnaround in the first quarter of this year. Year-to-date, the funds are up 12% and 13.4%, respectively. Perhaps investors are feeling that the end could be near?

For full disclosure, some of Tom Lydon’s clients own shares of XHB.

Tags: Homebuilders, Real Estate, Sector ETFs