UPDATE: Home Builders Rise As Investors Bet Worst May Be Over

Shares of home builders rose Tuesday, shaking off data showing existing-home sales fell to their lowest level in 15 years, as investors bet the worse-than-expected number may be a bottom.

The National Association Of Realtors reported earlier Tuesday that home resales dropped a record 27.2%--nearly twice as much as analysts had expected--to an annual rate of 3.83 million in July. Economists surveyed by Dow Jones Newswires had expected existing-home sales to fall by 14.3% to an annual rate of 4.6 million.

The data spurred losses in the broader markets, giving investors another reason to worry about the health of the economy. Though home-builder shares immediately fell following the data, they quickly turned higher. Analysts said investors in the sector were likely expressing optimism the number will rebound in August.

Among the largest gainers, Meritage Homes Corp. (MTH) recently traded 2.8% higher to $16.83, while KB Home (KBH) rose 2.7% to $10.06. Lennar Corp. (LEN) was recently up 2.4% to $13.03, while Ryland Group Inc. (RYL) increased 2.6% to $16.17. The sector has seen widespread losses in the past year, with Meritage down 25% and KB Home off 43%.

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