NEW YORK (TheStreet) -- The PHLX Housing Sector Index (HGX) has been my barometer for homebuilders and for stocks in the construction and industrial products sectors that provide products, services and materials for the housing market.
The housing index hit its 2013 low in mid-August. On Sept. 4, I wrote "Better Than Expected Construction Spending Helps Related Stocks."
Since then, the housing index has rebounded. Masco (MAS - Get Report), a manufacturer of home improvement and building products, has gained 21% since Sept. 3. That number is just shy of the 22% gain for USG (USG - Get Report), which provides building materials primarily for remodeling. Of the 11 construction-related stocks I have been tracking, only two are lower than their Sept. 3 closes.
The December reading of the National Association of Home Builders Housing Market Index showed a rise to 58 in a confidence trend above the neutral 50 reading. We also recently learned that single-family housing starts rose to an annual rate of 727,000 units in November.
Although these are positive trends, the normal run rate for single-family starts is 1.1 to 1.2 million units, and with higher home prices, mortgage rates on the rise, higher home insurance rates and increasing property taxes, homes have become less affordable on Main Street where family incomes are sliding.
Last week's release of the S&P/Case-Shiller Home Price Indices showed that the 20-City Composite gained 13.6% year-over-year in October with a 0.2% rise from September. From the June/July 2006 peak this index is down 20%, and it is up 23.7% from its March 2012 low in what I consider a reinflating of the housing bubble.
Since Sept. 3, five of the 11 stocks in today's buy-and-trade coverage were downgraded to sell or strong sell, while the remainder maintained hold ratings, according to www.ValuEngine.com.