“Evidence from the field suggests that the ‘for sale' housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process,” Stuart Miller, chief executive officer at Lennar Corp., the third-largest U.S. homebuilder by revenue, said in a June 27 statement.

Home prices are stabilizing and starting to increase. The S&P/Case-Shiller index of property values adjusted for seasonal variations rose 0.7 percent in April, the third straight gain. Stronger home sales will bolster producers of building materials.

At the same time, limited employment opportunities and competition from distressed properties are challenges for a housing market that's struggled to gain momentum.

Eoin Treacy's view Sentiment towards the homebuilding sector remains at a low ebb but the S&P Case Shiller Index of 10 US cities has been mostly rangebound since 2009. Assuming this is a Type-3 bottom as taught at The Chart Seminar, one would expect the lengthy ranging process to eventually result in excess inventory being worked through as affordability competes with inability to access credit for investor attention.

Lennar Homes, Toll Brothers , Meritage Homes Corp, NVR, Pulte Group, D.R. Horton, M.D.C. Holdings, Ryland Group, Standard Pacific and M/I Homes all remain in medium-term uptrends but are becoming increasingly overbought relative to their 200-day MAs. However, sustained moves below their respective trend means would be required to question recovery potential. (Also see Comment of the Day on June 27th).