Is it time to start thinking about housing sector plays? Yes, but only on a highly selective basis. With this in mind, Armstrong World Industries Inc. (AWI) is worth a review.

Armstrong, a leading producer of flooring products and ceiling systems for commercial, institutional, and residential buildings, closed up more than $4 Friday to about $49.90, after it trounced First Call's third quarter 64 cent per share estimate by earning 83 cents per share.

Armstrong also raised 2010 earnings guidance to $1.69 to $1.79 per share. Further, every Armstrong unit should register modest revenue growth next year, in 2011, and if the U.S./North American economic recovery strengthens, 2011 revenue could increase substantially.

If you check out the stats at KB Home's (KBH) quote page, you'll notice that it's been doing poorly for a long time, until recently, when, over the last month, it decided to bounce strongly off the 52-week low of $9.43. Today, with about three hours to go before the end of the session, it is higher by almost 3.8% to $12.15 on the back of an earnings report.

Indeed, the chart shows what I'm talking about. And you have to wonder if the strength in the homebuilder will continue. There is one problem: although volume does stand a chance of ultimately going above the average, at the time of this writing, it isn't too impressive.

Beazer Homes USA Inc (NYSE: BZH), following in the footsteps of other home builders, has been reporting awful results. However, to add more fuel to the fire, a report by the Charlotte Observer wrote the FBI and the U.S. attorney's office in Charlotte, N.C., along with the Internal Revenue Service and the U.S. Department of Housing and Urban Development, launched an investigation of Beazer Homes last week. OUCH!

Everyone is going after this homebuilder. This is as bad as the political backlash following the tech bubble imploding which led to Sarbox.

Look for other district attorneys around the country to start going after other homebuilders and their relationships with mortgage brokers and lenders. Do you think homebuilders reduced lending standards in order to get rid of excess inventory? Why not when you can dump the loan in the secondary market.

The housing industry is getting uglier and uglier, as we have been blogging about for a long time. No need to bottom fish yet. Wait for the political backlash to crescendo before looking at this group again.