There are things that tip us off to the coming conditions, and then there are things that we look at to confirm what our gut has already told us.

Leading indicators are things like the stock market. Stocks tend to rise before the associated industries post their gains. Rumor, innuendo and press releases drive stock prices up or down before confirmation.

Wait for the confirmation and you will be watching the boat sail while you are sitting on the pier.

Trailing indicators are the things that confirm what we already thought. The stocks went through the roof, and then the company announces their profits. We see that homes sales picked up two months ago. The government announces a recession or a recovery or an uptick in consumer inflation.

Yesterday, in Forbes, Colin Barr noted that Homebuilders are the hot stock so far this year.

Shares of the S&P Homebuilders Sector Spider (XHB), the exchange-traded fund that tracks the biggest publicly traded companies in the residential construction business, have risen 7% this year. That gain is noteworthy on its own, given the 7% decline in the S&P 500.

But what’s even more dramatic is the huge rally that erupted in these stocks in the middle of last month, right before the Federal Reserve started cutting interest rates in a bid to stave off a possible recession. The homebuilders ETF is up 29% off its early January lows, while components Toll Brothers (TOL, Fortune 500), Lennar (LEN, Fortune 500) and Hovnanian (HOV, Fortune 500) are up 40%, 52% and 96%.

So, is this a leading indicator, or is it an anomaly. Maybe it’s just trolling for bargains.

If it is a leading indicator, the property bargains will start drying up. There is a lot of pent up demand from the recent slowing of sales. If not, the biggest questions are when will the recovery take place, and how much downside is there for the local market?

I don’t see much more than a couple of points for Atlanta and Gwinnett County… and I really don’t see that happening.