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Home stocks on shaky foundation

Tuesday, September 25, 2012 - 02:04

Sept. 25 - Home building stocks have been building momentum but there is now concern they are overvalued, and poised for a pullback, even as home prices and home sales head higher. Bobbi Rebell reports.

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Housing stocks have been climbing higher. The S&P home builders' index has doubled since last October. Standard & Poor's David Blitzer: SOUNDBITE: DAVID BLITZER, CHAIRMAN OF THE INDEX COMMITTEE, STANDARD & POOR'S (ENGLISH) SAYING: "They are way up and they have done very well, and clearly they were coming from the pits in the sense that when housing crashed it was the biggest housing crash in decades." And there is good reason: Just Tuesday- news that U.S. home prices rose again in July. Consumer confidence is now at its highest level in seven months. And home builders have been reporting stellar earnings. But now there is concern the stocks may have gotten ahead of themselves- and are too pricey. UBS Senior Analyst David Goldberg: SOUNDBITE: DAVID GOLDBERG, SENIOR ANALYST, UBS (ENGLISH) SAYING: "They are just probably 20 or 30 percent overvalued right now. Now, of course the group is up 90 percent plus for the year right so coming back 20 or 30 percent sounds like a lot but not off the base that we've built and the move that we have had so far this year. " Among the concerns of many analysts: The weak employment market, low salary growth, mortgages remain tough to get, there's still a backlog of homes in foreclosure, and many home owners still owe more than their home is worth, or they don't have money for a down payment even if they sold their current house. But the market has changed in the five years since the housing collapse- smaller builders have been forced out- and the surviving, larger builders have better foundations on which to build. However, at current valuations- the stocks are another story: SOUNDBITE: DAVID GOLDBERG, SENIOR ANALYST, UBS (ENGLISH) SAYING: "We are definitely on the sidelines. I think things have gotten expensive in the home builders. If you get, you know, a kind of a slow recovery here, if you get slow job growth I think it's already baked into the stocks at this point. We are looking for a pullback to get more aggressive on the names." For example, Goldberg just raised his price on KB Home to $11. It is already been trading about $4 above that. And he's got a sell on the stock. Bobbi Rebell, Reuters.

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Home stocks on shaky foundation

Tuesday, September 25, 2012 - 02:04

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