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Is the homebuilder rally for real?

August 22, 2012: 1:55 PM ET

Shares of homebuilders rallied Wednesday after Toll Brothers reported strong quarterly results and an industry group said home sales rose in July.

The nation's leading luxury homebuilder reported a 46% jump in net income to $61.6 million in the quarter ended July 31. Toll Brothers also said new contracts rose 57%, and its contract backlog grew 44% during the quarter.

Toll Brothers (TOL) stock gained nearly 4% Wednesday. Shares of Hovnanian (HOV), D.R. Horton (DHI) and KB Home (KBH) were also higher.

The homebuilding sector was also supported by a report from the National Association of Realtors, which showed sales of existing homes rose 2.3% in July

StockTwits users debated the merits of the rally.

BrantleyFoster: $TOL i see this back to $26 ... riding on hopium b.s.

buyhighsellhigh: @BrantleyFoster $TOL There is also no hopium. It"s a FACT that they beat earnings estimates, huge increase in profit, and record demand.

That's a good point. As housing has slowly started to recover, Toll Brothers' stock has steadily climbed higher, gaining more than 60% from the start of the year.

edwardnh:Toll Brothers earnings commentary was very bullish on housing http://t.co/jNiCWCvr $TOL

JimCramer: $TOL says best demand in five years. But is it good enough in a market that is suddenly demanding a breather?

Housing has taken such a beating that this time, the turnaround may be for real.

himtam: $TOL Moving forward as economy gets stronger, Tol gets benefits as people move up & new purchases!

And that may put a temporary crimp in the bigger picture of the housing recovery.

PelzOptions: $TOL hate to say this but it looks like this may continue to run to the upside -- will delay short entry here for awhile ...

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