I don't know about where you live, but there is a definite slow-down in the building trades here. I have some rental property that needed a new roof and I was able to get a competent contractor in just 10 days to be on the job and get it done. A year ago, it would have taken 10 weeks. The contractor said he had already laid off one crew. I think the assumption that lower rates will bring back buyers is just whistling past the grave yard. I invite you to join me on the short side - short it all the way down to 30 and you will likely be able to cover at 25 in January!
Your comments about me never having seen a downturn could not be further from the truth. I am a builder in the northeast as the name implies and lived thru 81-82 with skyhigh mortgage rates. 90-91 Without nearly every bank in my state filing bankruptcy further driving the market down and the other minor slowdowns in between. I place this one between. We have seen significant cooling but october was our best sales month since may. Job growth is strong and interest rates are low, Inventory in Boston and washington D.C., which are the markets I track, is down about 8% from its end of august peak, although still high. Unlike the two most recent major declines Traffic is still quite good but they are all taking a wait and see attitude as public perception is still that they will be able to buy for less in a few months, and they may be right in areas of massive speculation like fl. Month over month #'s based on what I am seeing will turn positive in November and the year over year comparisons will be comparing to post Katrina so all the talking heads will start talking more about the bottom is behind us, and it will take until spring but this is how perception and momentum shift.
You have a great opportunity to short right now before it descends into the close today. Don't ignore this opportunity to make some money. $5 a share by mid January is very likely.
I love shorts - all 19 Plus million shares of them - please short some more - I am long and have the 2007 outlook of better rates (Don't really need much better - rates are acceptable now)
Shorts - don't look at the Pulte web site and Dell Webb web site to see current inventory - just go short now, anytime any day.
The real problem is oversupply. In downtown San Diego where there has been a massive building boom, 50% of the condos have been bought by "investors" (speculators??) in the last 3 years. These are weak holders and all who bought in the last year are already underwater.
Now that yesterdays low has been taken out, I recommend further shorting and am doing so myself.
You may be right. For sure you are frustrated. I would just encourage you to have a stop loss at the previous lows as I believe they will be taken out. I will do the same with my short postion -- stop it at the recent highs if I am wrong.
I have to agree that the homebuilders are ready to be shorted. This miserable countertrend rally seems to be over. The fundamentals of real estate are horrible and the bubble has started to hiss!! (not pop as in the case of stocks).
We are going to see a long trend down in these stocks interrupted by small countertrend rallies for the next few years.
I initiated a short position in PHM today and will continue to add to my short position or buy puts or put spreads or bear call spreads. All strategies work depending on what you are comfortabloe with. If you don't like paying interest or paying for time value then bear call spreads may be a good idea since you also get some money for time value.
Good luck and make some money
Can't see the point in being naked short.
If the bet is that the stock will fall below $25 by mid January, you can put on put spreads today that risk little and pay 4 or 5 to 1 if that happens. E.g. buy January 30 puts and sell January 25 puts, risks $125 per contract for a payoff of $500 anywhere below $25. Or a bit more aggressive, buy the 27.5 puts and again sell the 25s, costs only about $50 per contract and potentially pays $250.
The fact that the market is giving 4:1 odds on such things means it is not remotely the consensus view. But if you think it is sure to happen, put on lots of such put spreads, don't go naked short.
Since I have sucha large short position, I took the time to roam around San Diego and souther Riverside counties this weekend and look at the new home situation, especially PHM. Without going into details, it is BLEAK, BLEAK, BLEAK. Join me on the short side for a good time.