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Homebuilders, Related Stocks Rally On Strong Data, Earnings

Housing-related stocks rallied Tuesday on upbeat earnings and construction reports, but Federal Reserve Chairman Ben Bernanke warned the recovery may not be as potent as previous ones.

Housing starts rose to an annualized rate of 894,000 last month, up 3.6% from September and the best since July 2008. It also topped analysts' estimates despite the late-month ravages of Superstorm Sandy.

New construction of single-family homes actually dipped, while apartment starts rose. But they switched places when it came to building permits.

Housing's growing momentum has helped lift homebuilders for most of 2012. On Tuesday, shares of PulteGroup (PHM) rose 2%, Standard Pacific (SPF) 7%, Ryland (RYL) 6% and Lennar (LEN) 3.5%.

The Building-Residential/Commercial group, No. 6 out of 197 industries tracked by IBD, rose 2%. It's up 39.5% year to date.

Valspar (VAL), a maker of paints and coatings, topped Q4 earnings forecasts but missed revenue estimates. Shares still jumped 4% to a new high a day after key customer and home improvement retailer Lowe's (LOW), beat analysts' expectations for Q3 profit and sales.

Cabinet maker American Woodmark (AMWD) surged 12% after easily exceeding Q2 forecasts.

Bernanke's Mixed Message

After weighing on economic growth after the housing bubble, residential investment will add to growth and job creation over the next few years, Bernanke said in a speech Tuesday.

But he reiterated concerns that banks are being too tight with mortgage standards, preventing some borrowers with good credit from buying homes. That could dampen housing's boost to the economy.

"While historically low mortgage interest rates and the drop in home prices have made housing exceptionally affordable, a number of factors continue to prevent the sort of powerful housing recovery that has typically occurred in the past," he said.

A consistent dissenting voice on the central bank's policy committee, Richmond Fed President Jeffrey Lacker told a conference that he doesn't see housing being an economic main driver due to the excess inventory that built up before the crash.