Inspecting Housing's Foundation for Flaws

At some point, the combination of rapid building, record-setting debt levels and rising interest rates will put a major crimp in housing and related stocks, especially if the employment growth remains punk.

"Of course these stocks will blow up," Jeff Macke, founder and president of Macke Asset Management in San Francisco, said of the homebuilders. "Eventually, you'll get down to a few juggernauts in each housing space and it's an economic certainty they run out of space" to develop at favorable economics.

But Macke, a contributor to TheStreet.com's professional site, StreetInsight.com, has no positions in the sector, explaining that the homebuilders' relatively low valuations -- a reflection of the Street's skepticism about long-term prospects -- insulates them from big declines.

"[Their] hitting the wall could be forestalled longer than anyone thinks," he said, effectively summing up the recent history of this battleground sector.