Many Investors Remain Bullish on Housing Stocks, Despite Valuation Questions

Wednesday, 31 Oct 2012 09:28 AM

By Dan Weil

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Strengthening home price and sales data are keeping many investors bullish on housing stocks, even though some analysts caution that those stocks are overvalued.

New-home sales soared 5.7 percent in September from August to their highest level in more than two years. Meanwhile, housing starts reached their highest seasonally adjusted annual rate in the past four years.

And on Tuesday came news that the S&P/Case-Shiller index of home values in 20 cities rose 2 percent in August from a year earlier, the biggest year-to-year gain since July 2010.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

All the good news has sent shares of PulteGroup, the country’s biggest homebuilder, soaring 234 percent in the last year. And others aren’t far behind.

"If you look at homebuilding stocks, they're the best direct play on the U.S. housing recovery, and everybody wants to play it," Sorin Roibu, a housing analyst for Turner Investment Partners, tells The Wall Street Journal.

But Megan McGrath, homebuilding analyst at MKM Partners, urges caution.

"You can still be bullish on housing but not necessarily the homebuilder stocks," she tells The Journal. "We're still in the early stages of recovery, but these stocks are up around 150 percent in a year.”

Yale economist Robert Shiller isn’t sure about the durability of housing’s recovery. "This may well be the bottom for housing for some years," he tells Yahoo. But there’s still the uncertainty of the fiscal cliff, presidential election and Europe’s woes.

Editor's Note:
This Wasn’t an Accident — Experts Testify on Financial Meltdown

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