Ahead of the Bell: Homebuilders

"Our supply-demand analysis suggests that we will begin to see declining inventory levels after spring 2009, which will be an initial step toward price stabilization, with prices being the key driver of margins and earnings," Daniel Oppenheim said in a note to clients.

The sector has been battered by rising raw materials costs, the subprime mortgage crisis and falling home prices.

Meanwhile, the Standard & Poor's/Case-Shiller report on home prices is due out at 9 a.m. EDT Tuesday. The index, which focuses on major U.S. cities, has shown falling prices since fall 2006.

Moving forward, publicly traded homebuilders will likely be able to take market share, as privately controlled homebuilders struggle with lenders, Oppenheim said.

He rates Centex Corp., DR Horton Inc., KB Home, Pulte Homes Inc., Ryland Group Inc. and Toll Brothers Inc. at "Outperform."

Lennar Corp., MDC Holdings Inc. and NVR Inc. were rated "Neutral."

Hovnanian Enterprises Inc. and Meritage Homes Corp. were rated "Underperform."