Homebuilder exchange traded funds rose Monday after a report that U.S. pending home sales in January rose to the highest level in 21 months, lifting hopes the housing market is on the road to recovery.

Pending home sales increased 2% last month, the National Association of Realtors said.

“Buyers are returning to the real estate market on the heels of faster job gains for three straight months, falling home prices and record-low borrowing costs. At the same time, foreclosures are weighing on property values and construction, slowing the housing recovery,” Bloomberg reported.

SPDR S&P Homebuilders (NYSEArca: XHB) and iShares Dow Jones US Home Construction (NYSEArca: ITB) were up more than 1% on Monday. [Housing ETFs Weak After Sales Revised Lower]

“Clearly we had better weather conditions in January that might have helped, but we have a situation where we are seeing a number of housing statistics turn,” said Michael Strauss, chief economist at Commonfund, in a Reuters report. “It suggests housing is going to be an additive to GDP this year.” [Housing ETFs Rise with Builder Confidence]

The homebuilder ETFs are outperforming the market so far this year with gains of about 15% compared to the 9% rise for the S&P 500. [Why Homebuilder ETFs are Holding Their Own]

“This spring we expect to see continued forward momentum in the housing market as excess inventory is absorbed and low-cost mortgage debt becomes more prevalent,” said John Tashjian, principal at Centurion Real Estate Partners, in the Reuters article. “A strong spring housing season will be a critical indicator toward predicting growth in the housing market for 2012.”

SPDR S&P Homebuilders

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