Time to buy homebuilder stocks?

[Alexos]

Stocks like DHI dropped around 50% this year due to the housing bubble burst. DHI, for example, is trading at .76 price/book, and its long-term bottom is around 1. It also has a 4.4% dividend yield.

On the other hand, I read an article in the globe and mail today that the housing crisis will only get worse, and could last up to 5-7 more YEARS.

So when do great investors pick up these value plays? Is it worth the risk to pick some shares now and risk catching a falling knife? Or do we use some technical analysis and wait for a base to build up?

What do you guys think?

[soko]

We are seeing the largest housing inventory ever, enough vacant houses sitting on the market to take over a year to sell them all. Why do we need homebuilders?

[Uglyowl]

The majority of economists think we have only seen the beginning of the housing troubles. I have shorted KBH a week ago and so far so good.

I would wait for some stability first before even thinking of jumping in.

[NajdorfDefense]

DHI is not trading at .76 P/B. You fail to understand the most important part of that ratio, or past vs present.

Levitt has suggested they will write their book down by 70%+. Etc.

[gonebroke2]

DHI has another 100% to go on the downside.

[Alexos]

You're right, and that's why the prices have dropped so much. What I'm asking is basically how much of this negative news is already priced in? I'm not talking about 1yr, more likely 3-5 years investment horizon.

Since everyone has negative opinions on the stock and wouldnt touch it with a 10-foot pole, doesnt this mean its close to being a bargain?

[soko]

[ QUOTE ]
Since everyone has negative opinions on the stock and wouldnt touch it with a 10-foot pole, doesnt this mean its close to being a bargain?

[/ QUOTE ]

You realize it's possible they could go bankrupt, don't you?

[PRE]

No

[mrbaseball]

I have some Toll Brothers I can't get rid of. I bought it around 28 as a covered call play. I started writing out of the money calls against it and they kept going out worthless. So I switched to at the moneys and they all went out worthless then I started writing in the moneys. Last ones I wrote were sep 20's (expire next week) and I think the stock is 19 and change. I hope I get called out this time. If not I might just dump it. I wrote enough against it to make it a winner and I think it'll get worse before better.

Also have some sep 17.5 HOV puts I speced when it was up around 20. Rode 'em to 12.5 and sold the 12.5 puts as a hedge. Now it's at 10. I wish I wouldn't have spread them off [img]/images/graemlins/smile.gif[/img]

I think there are lots better opportunities than getting long the homebuilders.

[kimchi]

People seem to want to make things complicated. I read similar threads about tech stocks in the autumn of 2000. Then there are all the 'buy Partygaming' threads.

The are so many options and opportunities, I don't know why people would want to take the big risky plays.