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Beazer, Lennar, Pulte, Other Homebuilders Fall Off Multi-Year Highs

NEW YORK ( TheStreet) -- Homebuilder stocks were the 2013 leaders until peaking in mid-May. My benchmark for the housing market is the PHLX Housing Sector Index (^HGX) which peaked at 210.01 on May 20, up 22.6% on the year, leading all industry groups I have been tracking. Thursday the housing index set a 2013 low at 164.03, down 4.2% on the year. The index ended Friday virtually flat on the year.

The attempt at building new foundations began at 10 a.m. Thursday with the release of the National Association of Home Builders Housing Market Index which showed a rise of three points in August to a reading of 59, well above the neutral reading of 50, the highest in nearly eight years. Officials from the NAHB say that builders are seeing increased foot traffic and with firming prices potential buyers are anxious to find the right deal on a new single-family home.

Even with this elevated optimism the NAHB also has concerns. The inventory of both new and existing homes for sale is limited, and increasing production of new single-family homes is being slowed by tight credit for both builders and buyers, and by the limited supply of desirable lots and construction labor.

The release of Housing Starts data for July on Friday morning does not jive with builder confidence. Starts rose by a less than expected 5.9% with an annual rate of 896,000 units, while single-family starts declined 2.2% to a seasonally adjusted annual rate of 591,000 units in July. The chart below shows the growing gap between homebuilder confidence and single-family housing starts, which appear to be stalling at the 600,000 threshold.

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The last time I profiled the homebuilders was on July 17 in, Fear and Greed Return to the Housing Market. At that time eight of the homebuilders were rated hold and three were rated sell. Today 10 are rated hold and one is rated buy according to ValuEngine. In July five were overvalued by more than 20%, and now there are just three. In July seven had gains of more than 25% over the last 12 months and today there are just three.
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