Trader Brian Kelly noted that even though housing starts fell below estimates last week, 2017 could be the year for homebuilders to break out. The sector's climb reminded him of another big performer from 2016.
"The homebuilder is set up similar to how the financials did last year where this could be a big breakout trade if you have that economic growth that's going to push people in homes," he said.
Trader Karen Finerman said she's not concerned about the move in the homebuilders ETF. She attributed it to the end of the election and the end of uncertainty.
As the low-end buyer in the sector, KB Home has the potential to be a strong stock next year in the face of regulation rollbacks from the Trump administration, trader David Seaburg said. Even thought the stock is up 33 percent year to date, Seaburg said it still has room to grow, while the high-end Wall Street banks are going to continue to have problems with regulation.
"I like the KBH. Even though it's up strong, I think it continues," he said.