Are housing stocks signalling the next correction?

In contrast to 2005, the recent surge and subsequent retreat in homebuilder share prices is not a signal that the housing market is set for a damaging correction. Back then, homebuilder share prices were boosted by a rapid easing in mortgage lending standards. That led to an unsustainable boom in house prices, surging housing starts and record high homeowner vacancy rates. This time around, it is the lack of inventory which is supporting homebuilder share prices. With few signs that the housing market is overheating, it is well-placed to weather rising interest rates and an eventual economic slowdown.