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Home Builders Ride the Wave of US Housing Recovery

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Home builders are near multi-year highs, rallying two to three percent, as home prices surge on improving demand and limited supply. According to the Case-Shiller Index released this morning, home prices rose 10.9 percent in March versus the same period last year, seeing their best annual gain in nearly seven years.

Housing has been an economic bright spot for the U.S. with home builders, building materials, and home furnishing companies all benefiting from the recovery. The U.S. Home Construction ETF, which includes holdings like PulteGroup and Lowe's, is up 20 percent this year, outperforming the S&P 500, which is up 15 percent.

Builders' margins are expanding as they capitalize on higher prices and more demand, which have fueled the recent run-up in housing stocks. Toll Brothers, for one, reported a 36 percent jump in second quarter net orders last week. The luxury home builder has hiked prices approximately $26,000 per home in the current quarter.

"One year ago we were somewhat reluctant to raise home prices for fear of crimping demand," Toll Brothers CEO Douglas Yearley said in last week's earnings release. "Now we are finding that in many markets as prices increase, a sense of urgency takes hold and demand continues to rise."

Housing-related stocks have nearly quadrupled since their March 2009 low, but they're still about 30 percent below the July 2005 peak.

Traders say improved consumer confidence could attract more buyers, giving way for housing stocks to run even higher. May consumer confidence data is out at 10:00 a.m. ET. It's expected to show Americans feeling their best about the economy since October.

Elsewhere:

Tiffany opened at a 52-week high after the luxury retailer beat first quarter earnings and revenue expectations as sales increased across all regions. The high-end jeweler posted a profit of 70 cents per share, 18 cents above consensus. Sales jumped double digits in China, where Tiffany is expanding, after a slowdown in the world's second-largest economy weighed on revenues last year.

Last week, peers Signet Jewelers and Zale posted better-than-expected profits, but light revenues.

—By CNBC's Kristen Scholer. Follow her on twitter @KristenScholer

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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