Yes I must be crazy, right? I haven't started buying, but am thinking about it soon. HOV at 1/3rd of book value. KBH at 20% under book value. BZH at 1/4th book value. http://www.sec.gov/Archives/edgar/data/915840/000114420407039764/v082739_sc13g.htm http://www.sec.gov/Archives/edgar/data/795266/000095012407003624/v31777e10vq.htm http://www.sec.gov/Archives/edgar/data/357294/000035729407000019/f10q043007clean3.htm Look at their balance sheets. They all look the same - they tend to be carrying 2-3 bil in long term debt at about 7% interest. I haven't checked the rates on the debt, but I would assume since it is collaterizable against assets, they can raise money at attractive rates (yes, even in this environment). Remember that the homebuilders even now have a 'profit margin' on what they sell. Even if they sell at breakeven (which is already 30-40% below current resale prices), they are able to reduce their debt obligations easily. I'm just not seeing why their valuations deserve to be down here (especially HOV, BZH) other than a massive short piling thats occurring right now. As opposed to the subprime and even second tier lenders, in which revenues are directly derived from income by volume of business that exclusively depends on low risk spreads on their product, these homebuilders actually have assets and are actually -not- overlevered. Anyone have ideas on how to play this? As far as negative forces besides a lousy home building business, I am thinking workdowns of inventories over the next yr or so are going to drive down book values, on the other hand ... I am thinking the key for HB survival and valuation here is inventory value to debt ratio, since anyone realistic that this 'bottoming' will take a few more years (just as in the previous cycle) can easily count operating profits out for the next 3 years. ie if a HOV has 4.5 bil of inventories and 2 bil of debt, then there's a unrecognized valuation of 2.5 bil (or 1.5 lets say after debt carry costs) total. Lets be conservative and say they sell inventories at a 33% discount to 'present value' - (remember homebuilders sell at an aggressive discount to new family homes already), so 3 bil here. 3 bil - 2 bil debt = 1 bil. 62m shares / 1 bil For HOV, thats a cash value of $16/share. If they sell inventories at determined present value, thats $32/share. That doesn't include future value of homebuilding profit capacity after this cycle is over. The only way HOV is worth what it is now is if its inventories are worth 50% of their estimated value ... Anyone have good ideas with analysis capabilities ??? If they wash out another few points, I think I'll load up. But I think here loading will be with LEAPs. This is a long term trade - but with #s like this, I wouldn't be surprised if some buyouts brought the sector up to realistic levels.