The housing ETF XHB is displaying possible topping patterns in relative strength and price. You can see the distribution on the last dip, followed by this weak push higher. I would also include a chart of ITB, but it is a mirror image of XHB.
Real estate has already broken a gradual relative strength support line dating back to the start of the housing rally in Q4 2011. Price looks somewhat healthy, but the loss of this support line is huge. I think of it as trying to skiing up hill. Prices may still go higher, but eventually it will reverse. This line break implies this will be a weak group on the next market decline.
Maybe this Real Estate chart says a lot more about interest rates than housing? Maybe rates are leading real estate which is leading housing? I'm not sure, but the signs of weakness and future under-performance are clearly present in both groups.
The key take away here is that the market has priced in very bullish expectations for the housing market and the group needs a rest. Probably for a couple of market cycles (a year or two). If you manage funds, you're portfolio is best served under-allocating this group in the intermediate future.
I'd love to hear any comments to clear things up/debate and will gladly chat on twitter/stocktwits. You can tweet me @aro618.