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Spring Home Buying Season: Good, But Not Good Enough?

Here's how analysts at Raymond James put it in a note Wednesday morning: "...we fear that the upcoming spring selling season is again not likely to live up to the expectations implied by current valuations."

Phillip Spears | Digital Vision | Getty Images

It's way too early to call it a success or disappointment, but one thing is sure: in this environment, it's orders that matter. Toll reported orders up 19 percent year-over-year during a very slow period (November-January), so that is encouraging, but it's likely not good enough.

Why not? Because the momentum guys have piled into the homebuilders for months, expecting an even more robust spring home buying season.

And they are concerned that it may not be as strong as anticipated, and that stocks have run too far. The best housing ETF, the iShares DJ Home Construction Index, a basket of home building stocks, has fallen every day since February 13. It's had an incredible run: up nearly 30 percent since mid-December.

Home sales: up, but not leading to higher prices. January existing home sales (based on closings, not signings) rose 4.3 percent to the highest level in two years, but that level was still below expectations, and the prior month was revised downward.

Prices are still declining (down 2 percent year over year), likely due to the big overhang of distressed/foreclosure sales, which are still about one-third of sales.

Another distressing statistic: one-third of contract signings are not closing, due to inability to get a mortgage, or to overly conservative home appraisals.

Unless the lenders loosen up, this will be a major overhang.

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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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