Even smart guys say and do dumb things.

Take the corporate raider Carl Icahn, who has stalked corporate board rooms for more than 25 years by taking a stake in a stock, then threatening management to do something to boost its share price (as he’s now doing with his latest prey, Time Warner). More often than not, he’s been a winner, as confirmed by his net worth of more than $1 billion.

However, simply as an investor, it hasn’t been a gravy train for him, especially on the short side (a bet stock prices will fall). This is certainly the case in the homebuilding sector, where he’s said to have lost money, notably on Beazer Homes. About a month ago, Mr. Icahn, one source tells me, suggested to a money manager that it’s crazy to own shares in a homebuilder. It was a bum view. What he really should have said – based on their sizzling performance – is that it’s crazy not to own the homebuilders, which have shot up more than 41% this year after an increase of nearly 33% in 2004.

Mr. Icahn, who declined to respond to calls on the matter, is by no means the only victim of the homebuilding boom. George Soros has also taken his lumps by shorting homebuilders, as has his one-time sidekick, money manager James Rogers of Rogers Holdings, who recently admitted to me that his homebuilding shorts have cost him money. The same undoubtedly also holds true for many other investors who have taken short positions in homebuilding stocks, where the average short interest is said to run around 6%.

Meanwhile, dire warnings continue to mount. The money management legend Sir John Templeton has gone on record as predicting a real estate crash, as have a number of investment advisers. Likewise, the housing industry has become the favored whipping boy of the press, which practically every week blows the warning bugle, cautioning of an imminent collapse in housing prices. The Fox News Channel, for example, has been a leader in this respect by repeatedly heralding its Saturday lineup of business shows over the past three years with admonitions of the financial risks of owning your own home. So far, of course, it has been dead wrong.

Although it’s clear the national housing market is cooling somewhat – characterized by longer periods to effect a sale, growing price resistance, a rising number of “for sale” signs in many areas, and swelling speculation – homebuilding analysts, by and large, remain bullish.

A Bank of America Securities analyst, Daniel Oppenheim, seems to sum up the chief bullish argument, asserting that demand should sustain itself as higher wages and income levels mute the effect of gradually rising interest rates. He notes, too, that his recent community checks point to continued strong demand despite a modest rise in 30-year mortgage rates. Accordingly, he sees further upside in the homebuilder stocks, about another 7% based on his price targets. He attributes this expectation to positive trends and reasonable valuations, which he believes should offset the rate challenges.

His favorite stocks, each of which he rates a buy, are D.R. Horton, Hovnanian Enterprises, Ryland Group, and Toll Brothers.

Given the latest short positions in homebuilding stocks, if Mr. Oppenheim is right in his bullish assessment of the industry, more blood will flow on Wall Street, and it’ll be the short-sellers who will do the bleeding. The numbers tell the tale. Most recent short interest figures on a number of the major homebuilders show substantial short stakes. Among the highest: Toll Brothers (21.6 million shares short), Beazer Homes (9.1 million shares), Lennar Corporation (8.5 million shares), D.R. Horton (8.4 million shares), KB Home (8.4 million shares), Centex (8.3 million shares), Pulte Homes (7.5 million shares), Hovnanian (6.5 million shares), WCI Communities (4.1 million shares), and Ryland (3.7 million).

Meanwhile, another close tracker of the housing industry, Mark Vitner,a senior economist at Wachovia Securities, tells me he doesn’t buy into the bubble story, which he views as “greatly exaggerated.” No question about it, the housing market is beginning to cool off, he said. Still, he figures this year will produce record home sales of 8.1 million to 8.2 million units, up from about 8 million last year. And he doesn’t see much slowing next year because, as he points out, demand still exceeds supply. What’s more, he contends, “any dramatic slowing is still several years away.”