Rocky White on the housing recovery

Evidence of a housing recovery continues to pile up, but lingering signs of skepticism suggest there's still plenty of sideline cash to fuel further gains. Just last week, the Commerce Department said housing starts rose 0.8% in February, while building permits rose to a four-year high, topping economists' expectations. Furthermore, existing-home sales jumped 0.8% to the highest level since November 2009, the National Association of Realtors (NAR) reported. Technically, the iShares Dow Jones U.S. Home Construction Index Fund (ITB - 24.20) recently bounced from key support at its 80-day moving average. The fund touched a multi-year peak of $24.88 on Wednesday, and is now consolidating atop the formerly resistant $24 level. Among individual equities, KB Home (KBH) and Lennar (LEN) both defied the skeptics, touching their own multi-year highs after reporting solid earnings and announcing plans to ramp up development. Despite bullish magazine covers on the radar -- including "The Great American Housing Rebound" from Bloomberg Businessweek and Money's "Housing is Back" -- pessimism remains prevalent, as evidenced by The Wall Street Journal's recent warning that the sector is "exhibiting froth." Of the 32 names we track under the "builders" umbrella, all are trading north of their psychologically significant 200-day moving averages, yet just 43% of analysts offer up "buy" endorsements -- even less than a year ago.

~ Rocky White, Schaeffer's Investment Research, Monday Morning Outlook, March 25, 2013