The market believes that MTH has impaired their inventory and near term losses are slowing. Also, they are heavy concentrated in the state of Texas where home prices have been flat or slightly rising. In the long-term, there is no real upside in owning homebuilder stocks because home prices are not expected to rise for a very long time.
Even after housing bottom, home prices will increase in the future at a very slow rate (= to wage growth). As a result, future profit growth will be equal to inflation. The increase in profits over the past 5 years have been solely attributed to easy credit and low mortgage rates. Since subprime, option arms, Alt A, no down payment, and rapidly declining mortgage rates are gone for good, home prices in the future will go up based on income growth. This is generally equal to inflation. Why would anyone own a stock of a company with profits that will grow at the rate of inflation?
Unless, of course, they can buy/option vacant land more cheaply than before, and put the squeeze on contractors and suppliers. Also, mortgage rates are trending back down, and the FNM/FRE rescue will help in that respect.
It will be interesting to see which sectors aside from financials go up on Monday.