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Housing Stocks Hit New Highs—Too Much Optimism?

Home Construction
Home Construction

Home building: An awful lot of optimism built into the spring home buying season!

This morning, the NAHB Housing Market Index, a sentiment indicator of builders, climbed to a four-year high.

Also today, Owens Corning , a force in the building materials industry (roofing, fiberglass, etc.) put up a disappointing report, with similar optimistic language: “Looking forward to 2012, we anticipate improved housing starts in the U.S. and modest growth in the global economy.”

Yesterday, building materials giant Masco, strong in plumbing, paint, and cabinets, disappointed, but added they were heading into 2012 with “cautious optimism.”

Bottom line: There’s an awful lot of optimism that housing is going to turn around. The iShares Home Construction Index is up 50 percent since October. Builders like Ryland, Lennar, and PulteGroup are at new highs. Not a lot of room for error!


Respected housing analyst John Burns is forecasting 20 percent growth in sales in 2012. Most of the builders have that growth in the backlog already, Burns notes, so something bad will have to happen to stop it.

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