NEW YORK (TheStreet) -- The housing data we have seen in recent months has been favorable. Homebuilder confidence has been on the rise along with housing starts, building permits and new home sales.These improving trends need to continue in order to bring the market for new homes back to normal. In this environment homebuilder stocks may have rallied too far too fast. There are numerous hurdles that must be cleared for the construction of new homes to contribute to economic growth and to create good-paying jobs. First of all, www.ValuEngine.com shows the construction sector is the most overvalued by 18.4%. In addition, my benchmark for the sector, the PHLX Housing Sector Index ( HGX) shows a potential triple-top on its daily chart, and is extremely overbought on its weekly chart, and has been overbought since the week of August 10. HGX has surged 125.5% since October 2011, and is up by 61.4% year to date. Recent data on the housing market continue to show steady improvements in the market for new homes. The National Association of Home Builders reported its Housing Market Index, a measure of builder confidence, rose a point to 41 in October as serious buyers visited sales offices around the country. The HMI has been rebounding for six consecutive months, but it remains below the neutral reading of 50, so it really means that builders are becoming less pessimistic.