Time for another downtrend in the homebuilders???

Discussion in 'Stocks' started by jackstone54, May 1, 2008.

  1. In the last two years, the homebuilders showed some strength between Jan-April. Then in May they all took a big slide. Im assuming that the initial strength between Jan-May was in anticipation of the summer when house buying is usually most prevalent because the kids are now out of school.

    I took a drive around and there are an increasing amount of for-sale signs popping up and I've come to find that many of these are bank repos.

    Somehow I feel we might have to retest January's lows...
  2. GTS


    I don't think any past seasonal trends will have any effect on homebuilders for at least the next year - things are quite different from normal right now.

    That being said I agree with you that I think they are in for a world of hurt and it hasnt been fully priced in.

    The trickle-down effect of ARM resets leading to missed payments/loan defaults leading to foreclosures is just starting, its not anywhere near over.

    There is going to be a glut of low-priced REO homes for sale on the market for quite some time and I don't think there is enough demand out there to soak it up, especially now that lenders have tightened up on their credit policies (e.g. you need to have more then a pulse to get a mortgage these days, unlike 2005)
  3. It appears the XHB is slipping a little more today (and yesterday). I would be a buyer of the XHB at the 52 week low or a notable bounce at the 15 area. I wouldnt buy any of the individual components as who knows if one of them might announce a bankruptcy.
  4. GTS


    I agree, XBH is the way to play it and I would take a shot around the Jan lows.