Bargain hunters waiting for the bottom of the real estate market to drop out shouldn’t hold their breath, as an inventory glut, price-cutting standoffs and economic conditions continue to weigh down homeowners and exchange traded funds (ETFs).

A 6.3% increase in the April pending home sales index was a statistic that appeared to give many in the market false hope, reports Caroline Baum for Bloomberg. But in this market, anything looks positive.

The housing market index fell 1%, leaving the total matching its all-time low, reached in December 2007. Compounding the mess are the threat of looming interest rates, especially for builders, as materials are already shooting up in price. Builders are reluctant to slash prices to compete with the growing inventory of unsold and foreclosed homes, while homeowners are in a standoff with buyers, as they refuse to drop their prices, even as property values diminish.

Basically, forget the granite! In Southern California, one of the first areas the bubble started, average home prices are already down 27% over the past year. The biggest risk in price cutting is alienating previous customers and current buyers leaving their contracts. According to the Mortgage Bankers Association, first quarter foreclosures rose 2.47%.

Your safest bet is to just wait until the real estate ETFs turn back above their trend lines instead of trying to call the bottom. It looks like the markets haven’t yet figured out which way they want to go.

ETFs that are waiting for the bottom:

• iShares Dow Jones US Home Construction Index Fund (ITB), down 7.4% year-to-date
• SPDR S&P Homebuilders (XHB), down 2.7% year-to-date
• PowerShares Dynamic Building And Construction Portfolio (PKB), down 2% year-to-date

Tags | GUR, Homebuilders, Real Estate