It was a bad day on Wall Street Thursday for housing stocks. In no particular order Census Bureau data was released showing that new home sales had declined by 8.1 percent in June compared to May and that May's numbers weren't nearly as shiny as was first thought.

(Read More: New Home Sales Decline from Downgraded May Numbers)

Then several of the big home builders released quarterly earnings that missed analysts expectations. An already jittery stock market did not take it well. The exchange traded fund that trucks home construction fell to a two month low, losing 3.4 percent of its value as most home builder and home builder-related stocks fell. ITB was down another 0.79 percent in early trading on Friday.

Both D.R. Horton and Pulte announced that their earnings fell short. Horton reported earnings in its fiscal third quarter of .32 per share; analysts had expected 0.49. Pulte reported 2^nd quarter earnings of 0.11 per share, less than half of the 0.26 expected.

Horton said its earnings fell short due to pretax charges of $54.7 million related to inventory impairments. These were tied to the Chicago market where sales are still weak and the company said it was attempting to boost sales and cash flow while reducing those inventories and sales cancellations. MarketWatch's Tomi Kilgore said “Wall Street didn’t appreciate the company’s new strategy of focusing on increasing unit sales over maintaining profit margins.”

The news wasn't really all that bad. Horton, the nation's largest home builder, said its revenue was up 28.2 percent to $2.09 bill, just short of expectations and Pulte's sales were up 15 percent. Horton's CEO, in a conference call with reporters called the demand for new homes relatively stable and said that his companies aggressive acquisition of building sites and more aggressive use of sales incentives had given the company its highest market share ever.

Pulte reported that while net home orders during the second quarter were down 2.2 percent form the same quarter in 2013, sales per active community were up about 6 percent and the net order price was 7.1 percent higher. Home deliveries were down 8.5 percent.

Another indication that the near future of home building isn't all that grim comes from the most recent NAHB/Wells Fargo Home Home Market Index survey. The survey, a measure of builder confidence in the market, moved significantly to the positive, crossing over the benchmark score of 50 which indicates more builders view the market as good than view it as poor. This was above analysts' expectations and was the first time since January such a score had been reached and builders also expressed optimism for future sales. It was only builders' attitudes about current traffic, still well below the milestone level, that showed lack of confidence from those on the front line.

(Read More: Homebuilder Confidence Back Into Positive Territory)

Joseph Hogue, writing in Motley Fool the day before the Horton and Pulte financials were released said the recent drop in stock prices for most home builders over the last month was the result of a report (which he attributed to National Association of Home Builders but it was actually Census Bureau construction data) showing a surprise drop in home construction in June. Permits issued during the month declined by 4.2 percent to 963,000 units (a seasonally adjusted annual figure) and housing starts were down by over 9 percent to 575,000 units.

(Read More: Housing Starts Fall Enough to Break 3yr Trend of Improvement)

Hogue pointed out that the weakness in construction data was almost entirely due to a near 30 percent drop in starts in the southern region; surprising because of the relative strength of that region in recent months. He asks whether that anomaly might just be the result of a bad month of collecting and reporting data in one region. Even if correctly reported, he said, there is a strong possibility that there will be a rebound in next month's data as the long term fundamentals look promising. He, in fact feels so strongly that the data for the south might be incorrect and thus negatively skewing the national data, that he spent considerable ink laying out and justifying that premise.

Hogue consludes that, "Whether June construction data ultimately proves an error or not, there is good reason to believe that home builder shares have upside potential. July data for new starts could show a rebound and the deficit in new construction should support building for several years"