Beware the new builder bubble

By Paul R. La Monica, CNNMoney
2009-4-8 12:04:49

NEW YORK (CNNMoney.com) -- Signs of stabilization in the housing market during the past few weeks helped lay the foundation for a nice pop in homebuilder stocks. Now, a big merger in the sector could be setting the framework for a continued rally in the group.

With Pulte Homes (PHM, Fortune 500) agreeing to buy rival Centex (CTX, Fortune 500) for a premium of 38% to Tuesday's closing price, investors excitedly bid up shares of other homebuilders Wednesday morning on the hopes that they too would succumb to the urge to merge.

Shares of Hovnanian Enterprises (HOV, Fortune 500) and Lennar (LEN, Fortune 500) each gained about 7% in late morning trading. Standard Pacific (SPF) and Beazer Homes (BZH), two of the hardest-hit builders during the housing slump, shot up 10% and 15%, respectively. But both stocks still trade for only about a buck a share though.

	Investment Basic Investment Overview Investment Approache Fundamentals Data Investment Stories www.fxj108.com	Beware the new builder bubble By Paul R. La Monica, CNNMoney 2009-4-8 12:04:49 NEW YORK (CNNMoney.com) -- Signs of stabilization in the housing market during the past few weeks helped lay the foundation for a nice pop in homebuilder stocks. Now, a big merger in the sector could be setting the framework for a continued rally in the group. With Pulte Homes (PHM, Fortune 500) agreeing to buy rival Centex (CTX, Fortune 500) for a premium of 38% to Tuesday's closing price, investors excitedly bid up shares of other homebuilders Wednesday morning on the hopes that they too would succumb to the urge to merge. Shares of Hovnanian Enterprises (HOV, Fortune 500) and Lennar (LEN, Fortune 500) each gained about 7% in late morning trading. Standard Pacific (SPF) and Beazer Homes (BZH), two of the hardest-hit builders during the housing slump, shot up 10% and 15%, respectively. But both stocks still trade for only about a buck a share though.