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More Good Housing Data Today

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AP

The overall economic data was okay today: CPI was in-line, Retail Sales were in-line, Empire State index was big upside (but the outlook was weak). And perhaps most importantly, the NAHB Housing Market Index was well above expectations. Sales, traffic, and future prospects were all better.

The NAHB Index rose to 29, the highest reading since May 2007. Home-building stocks are rallying on that.

Okay, it's a pretty modest number. A reading over 50 indicates higher levels of optimism, so it's still a pretty weak data point...but it's improving.

What about the slowdown after the warm weather? The NAHB Chairman Barry Rutenberg said, "Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause in April."

That's good news. I am not pleased to hear that builders are also complaining about rising material costs.

What about that ocean of foreclosed properties still out there? We keep waiting for the Great Foreclosure Dump, but it's more like a rivulet than a flood. It's not that they aren't there, their just isn't wholesale dumping going on. Somebody is managing the supply fairly well.

One more point: we will get earnings from move-up builder Toll on May 23. While overall order growth from builders has been strong this spring (the eight that have already reported have seen order growth around 34 percent on average), I suspect Toll will report excellent numbers, supporting the idea that the move-up buyers are having a somewhat easier time financing their buying than first time buyers.

The biggest problem with home building stocks: most are near new highs and fully reflect a modest housing recovery this year.

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