Inspecting Housing's Foundation for Flaws

Reports of the real estate bubble's demise have persistently proven to be premature. Some folks, notably Federal Reserve Chairman Alan Greenspan, even dispute the notion a real estate bubble exists.

But recent weakness in housing stats suggests the winning combination of cheap borrowing and rapid price increases finally may be coming to an end. Such a change in sentiment, should it persist, has widespread implications for the economy and some of the market's best-performing sectors, including the still-hot homebuilders.

"Regrettably, we are witnessing a replay of the late-1990s telecommunications and technology boom-and-bust experience, where a surfeit of speculative finance fosters destabilizing overspending in the 'hot' sectors," writes Doug Noland, market strategist at David Tice & Associates, managers of the (BEARX Quote)Prudent Bear fund. ...