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10 Stocks Leading the Way in the Housing Recovery (Update1)

Stocks in this article: FAST URI PHM KBH LEN MAS TOL USG BZH DHI

(Story updated to add that the pace of U.S. homebuilding in February disappointed many in the industry, falling 1.1% from January.)

BOSTON ( TheStreet) -- The much-anticipated rebound in the new-home market may be here with this spring's selling season. And that has investors diving into these highly cyclical stocks after years of decline.

Indicative of that, the S&P 1500 Homebuilder Index is up 35% this year, versus the S&P 500's 11.7% gain.

And that jump has come just months after the close of a year in which only 304,000 new homes were sold, the lowest on record that go back to 1963, according to the Commerce Department.

But today it was reported that the pace of U.S. home building fell in February, by 1.1% from January, well below expectations, which called for an increase of 1.3%, according to the Commerce Department. But there are signs of growth ahead, as permits for new construction reached their highest levels since 2008.

The tenuousness of a potential rebound came through in a report Monday from the National Association of Home Builders as its measure of confidence of new-home builders remained unchanged in March from February despite a number of economic positives in the past few weeks. But the current level is the highest since June 2007 and over 50 builders reported "good" market conditions, which hasn't been the case since April 2006.

Still, buyers are skittish as any form of bad economic news is likely to scare them off. And many markets remain clogged with unprocessed foreclosures, and the new borrowing standards are tough, especially for first-time buyers. Those issues are somewhat offset by low interest rates.

S&P Capital IQ analysts said in a recent research note that "most publicly traded builders are in a stable, competitive position after reducing costs, retiring debt and increasing cash positions. However, we think the housing market will improve slowly in the next year as it will take time before buyers' confidence and the job market progress enough to support a more favorable view of home ownership."

Here are 10 stocks expected to benefit from the homebuilding industry's rebound in inverse order of analysts' "buy" ratings:

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