Builders' stocks rise as home sales fall

— -- The news from the housing market keeps getting worse, but you wouldn't know it by looking at home-builders' stocks.

Shares of home builders gained Wednesday, continuing a head-turning performance this year. Even housing pessimists can't overlook a recent run that has:

But that didn't faze the stocks. Toll shares rose 71 cents, or 3.1%, to $23.83. The iShares Dow Jones U.S. Home Construction exchange-traded fund, which tracks the industry, rose 1.4%, while the broad S&P 500 index fell 0.1% to 1380.

Housing has been one of Wall Street's concerns.

If the recovery in building stocks proves more than a short-term rally off depressed levels, analysts say it could bolster confidence in the broad market.

"It seems investors are starting to look ahead to see things will pick up (in housing) in the second half" of 2008, says Paul Hickey, co-founder of Bespoke Investment Group.

The optimists are betting the Federal Reserve's five-consecutive cuts to short-term interest rates since last September, and hints more may be on the way, will help the housing market stabilize, Hickey says.

But while some investors desperately want home-building stocks to bounce back, there are plenty of skeptics who say it's a mirage.

The 1,400% run-up in home-building stocks from 2000 to 2005 and subsequent 80% crash was nearly identical to the rise in dot-com stocks from 1995 to 2000 before the bubble burst, says James Stack of InvesTech Research.