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Investing in America: Home Remodeling on a Roll

America's housing market is still struggling to find solid footing amid millions of delinquent loans and foreclosed properties.

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But as the wider economy begins to strengthen, and Americans start to feel better about their current and future finances, they are dipping their toes back into the housing waters, in the form of remodeling.

"Residential remodeling this winter is as strong as it has been in more than five years. We expect residential remodeling to continue to grow throughout 2012," says Joe Emison of Texas-based BuildFax, a division of BUILDERRadius and creator of the BuildFax remodeling index.

Residential remodeling, as measured by building permits in January, were at an annual rate of, up 13 percent from December and 11 percent from a year ago, according to BuildFax. The index shows particular strength in the Midwest and the West.

Sales of foreclosed properties may be helping the numbers, as investors have swarmed the market, buying up distressed properties and turning them into rentals. Many of those properties have been either abandoned or vandalized and need at the very least basic refurbishing and at the most full renovations.

Great news for U.S. companies that serve the remodeling market, and of course their stocks. Sherwin Williams , which gets 77 percent of its revenue from the U.S. market, is trading at an all time high, going back to its IPO in 1964. Home Depot is seeing the best levels since April of 2002, and shares of Lowes are at a high not seen since 2007. Both get all of their revenue from U.S. customers.

Others poised to profit: Weyerhaeuser , which takes about 65 percent of its revenue from U.S. sales and of course U.S. Gypsum , whose shares are up 103 percent in the last three months, United Rentals , which rents construction equipment, shares up 44 percent this year, and MASCO , which makes all kinds of building products.

This entire sector is exceptionally well placed because it can profit off not only distress in the overall housing market, but improvements in it as well.

As homebuyers trickle back in this spring, they will fuel further renovations, and as banks work through distressed loans and sell foreclosures off to investors, there will be ever more housework to be done.

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick

  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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