Reasons to Hesitate on Housing

Shares of homebuilders (Lennar (LEN), DR Horton (DHI), Toll Brothers (TOL), Hovnanian (HOV), KB Home (KBH) and PulteGroup (PHM)) outperformed on Tuesday. The group had declined with the market after Election Day, but it bounced back amid this week's optimism about a housing recovery. The home-improvement retailers -- Home Depot (HD), Lowe's (LOW) -- also caught a lift.

I agree with Stephanie Link's call that there are many ways to play U.S. housing at this stage, including key banks leveraged to the sector (such as Wells Fargo (WFC) and SunTrust (STI)). But here are some points that you might want to consider before jumping on board. I see a potentially neutral-to-positive Washington overlay emerging for housing, provided we don't go over the fiscal cliff. But there could be a lot of back and forth in months ahead....1003 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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