In our previous post on the strength in homebuilder sentiment, we received a number of comments that the NAHB is 'corrupt,' 'self-interested,' or just plain wrong. Readers are entitled to their opinions regarding the NAHB, but the reality is that the group's sentiment index has done an excellent job tracking the prices of homebuilder stocks. The chart below compares the NAHB Homebuilder Sentiment Index to the S&P 1500 Homebuilder Index over the last ten years. As shown, the two indices have closely tracked each other in both the short and long term as each decline in sentiment has been accompanied by lower prices for homebuilder stocks and vice versa.
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