Maybe Thomas Wolfe is right, and you can't go home again. But it's an opportune time to revisit the always-controversial housing market and its related shares.

Recent words and deeds by the Federal Reserve seem designed to engender further strength in the already robust housing market, although some economists worry about it being too much of a good thing.

Another round of refinancing and/or home-purchase activity should aid homebuilders, but even once-staunch bulls say it may prove to be a last hurrah for the sector.

On Friday, the government reported that housing starts fell 6.8% in April to 1.63 million seasonally adjusted units. That was below consensus estimates and the lowest level since August 2002, but still very strong by historic standards. Also, mortgage applications for purchase are again at record levels, housing affordability remains high, and new-home sales moved sharply higher in March, noted Peter Kretzmer, senior economist at Banc of America Securities. "All of these factors point to a rebound in the starts data."

Earlier in the week, the Mortgage Bankers Association index of mortgage loan applications -- which includes purchases and refinancings -- rose to 1417.8 for the week ended May 9, up 13.7% from the prior week. Refinancings accounted for 72.4% of total applications in the latest survey, up from 68.7% the prior week.

Since May 9, yields on the benchmark 10-year Treasury note have fallen further and were below 3.50% early Friday following another round of disappointing economic data. Such low levels are very likely to spur another round of refinancing activity, perhaps challenging the record levels set in March.

Furthermore, "if we get stabilization in the labor market, we're probably going to observe another surge in home sales," said John Lonksi, senior economist at Moody's Investors Service, who noted that 30-year fixed-rate mortgages have fallen to 5.45%, a new low for the cycle. "That's probably good for the economy, as it will provide another boost to consumer spending on appliances, furniture and other items bought following the purchase of a home."

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