Homebuilders shares end 3Q higher

Pulte Homes led the sector with shares jumping more than 42 percent from $9.82 at the start of the period to $13.97 on Tuesday.

The photo-finish, second-best stock performer during the third quarter was Hovnanian Enterprises, posting a gain just under 42 percent from $5.63 on July 1 to $7.99 on Tuesday's close.

Investors drove up Lennar's shares more than 28 percent from $11.83 at the outset of the quarter to $15.19 on Tuesday.

Luxury homebuilder Toll Bros.'s shares rose more than 27 percent from $19.81 on July 1 to $25.23 on Tuesday.

The stock gains were counterintuitive considering the Standard & Poor's 500 index fell 9 percent over the quarter and homebuilders have been hammered slowing home sales and shrinking margins as the housing market has deteriorated.

In addition, a recovery in the housing market remains hampered by tighter mortgage lending standards, falling home values and competition from unsold preowned and foreclosed homes.

Investors, however, have been itching to call a bottom to the housing crisis whenever builders' fortunes have shown some sign of improvement, and that's led to a sharp fluctuation in the sector's stock moves, said Robert Curran, an analyst with Fitch Ratings.

"In general, the builders periodically this year have benefited from some investor expectations that a bottom is approaching, and that just, broadly, has overlaid those equities," Curran said. "This has periodically happened for three years running."

At the other end of the homebuilding industry, shares of Centex, D.R. Horton and Beazer Homes USA posted the smallest gains over the quarter.