The homebuilder and related stocks are in an "official" bear market. For a short-seller it's the perfect scenario, as the decline in homebuilder stocks has received little to no attention from the mainstream financial media. The current bubble is a "price bubble" that was fueled by the $2.5 trillion of printed money dumped into the housing market by the Fed and de facto subprime mortgages underwritten by the Government (Fannie Mae, Freddie Mac, FHA, VHA, USDA).
Prices are beginning to fall in many markets and inventory is rapidly increasing. Many of the new listings are flippers who soon will become desperate to unload. This is how the mid-2000's market collapse was triggered.
Meanwhile, the housing market stocks began to collapse in mid-2005 - an omen ignored most. It would appear that history will once again repeat. And the homebuilders have a long way still to fall:
My Short Seller Journal subscribers and I are making easy money shorting the homebuilder stocks. I called Hovnanian at the beginning of the year at $2.88. It's currently trading at $1.53. The homebuilder stocks provide opportunities for profitable short term trades plus positioning for long term short-sell "investing." In last week's issue I discussed a strategy for navigating yesterday's earnings reports for DHI, PHM and BZH. We are already making money on these ideas. You can learn more about this newsletter service here: Short Seller's Journal information.
