By Wendy Leibowitz. A surge in home construction company stocks in recent weeks is giving some frustrated home builder CEOs vindication at last that their stocks are indeed worth more than they were getting credit for.

Stocks of housing construction companies rocketed 38 percent between mid-March and the first week of June, according to the Philadelphia Exchange Housing Index. That was more than twice the rise of the Dow Jones industrial average and nearly quadruple the rise of the Samp;P 500.

The NAHB had predicted that sales of new homes would drop about 5 percent in 2002, but such a fall did not occur. The group now says it expects a falloff later this year.

Perhaps even more positive was the move by Lehman Brothers to upgrade its price targets, despite the run-up in housing stocks, according to a report early last month in Steven Fockens, an analyst at Lehman, lifted his targets for Centex to $92 from $75; D.R. Horton to $36 from $29; KB Home to $74 from $60; Lennar to $80 from $65; Pulte Homes to $83 from $73; and Toll Brothers to $35 from $31.

"Higher return on equity and good fundamentals support an average of 1.8 times book value and 10 times earnings versus our prior use of 1.6 times book and 8 to 8.5 times earnings," Fockens said in a note later published on He explained that 1.8 times book would be worrisome if not for historically low earnings multiples. Those low multiples are part of the reason housing stocks have made such impressive gains, with Toll Brothers up 46 percent since the beginning of the year, D. R. Horton up 62 percent, and Hovnanian up 85 percent.