Shorts observe heated housing market and hear about a bubble. Therefore, short housing stocks. If investing were that easy we would all be rich. You make money by observing what others do not. You don't make money by observing what the majority sees.
The smart money waits for the stocks to break down before shorting.
Exactly. Very well put. Now is the time to buy not sell as the prices are increasing not decreasing. The fundamentals are excellent. Money is plentiful and demand for housing very strong. I do not see any reason why we can't continue to make more money in KBH and others short-term. I also like some small REIT's too, for example NRF. The recent insider buying in NRF at $10 is very interesting in my opinion. The insiders are buying and this is a new and relatively small company (where insider activity is more useful to outsiders).
Check out my site. We monitor the equity market daily and track the big insiders (Commercial institutions). Overall I continue to believe the U.S. stock market is range bound and will remain that way for some time. However this is a stock picking market and I still like stocks like KBH and others (like NRF too).
There is no easy investing in the market unless you are a fan of the "Martha Stewart Trading Technique"
Whether you are short or long you must do your homework. Following the masses rarely pays off...that being said it does not mean that shorting the HBs is wrong right now. It actually is a great time...prices are inflated both in real estate and in the stock. I have many positions shorting HBs...each time there are this infated rise on no good news I short some more. This may not work for everyone but in itself is smart trading.