Homebuilder stocks and exchange traded funds are in focus this week amid several key data points on the housing market that will let investors gauge the strength of the ongoing recovery. Builder ETFs are hovering around multiyear highs and have been one of the best-performing sectors in 2012.

SPDR S&P Homebuilders (NYSEArca: XHB) has a year-to-date gain of about 46% and the Federal Reserve has launched another round of quantitative easing designed to support the mortgage market.

“Meanwhile, housing numbers should continue to be positive with the possibility of housing starts, due out on Wednesday, topping 800,000 annualized units for for the first time in the expansion. The Home Builder Survey, due out Tuesday, could show a further gain following a long string of increases while Existing Home Sales should only see a modest decline following some nice recent gains,” David Kelley of JP Morgan Funds wrote in a note.

“You get more benefit when people buy homes,” Ben Bernanke, Federal Reserve Chairman, said recently. “It’s the purchases of new homes that generate the construction activity, the furnishing, all those things that help the economy grow.”

Improving housing data has helped push ETFs such as XHB and the iShares Dow Jones US Home Construction Index Fund (NYSEArca: ITB) up to new highs. ITB has gained 66% in 2012. Recent reports have shown housing starts at a 28-month peak, existing-home sales at a 27-month best, home prices at new five year highs, with the average 30 year mortgage rate at around 3.36%, which all look positive for the sector, reports Schaffer’s Investment Research on MinyanVille. [Builder ETFs Sliding with Pending Home Sales]

The Federal Reserve’s latest plan to buy mortgage-backed securities is also bullish for the sector, putting residential real estate back in the spotlight. Investors are eyeing the housing starts reports set to be released Wednesday and the existing home sales due out on Friday. [Homebuilder ETFs Rally on Housing Bottom Calls]

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