Is it too early to get into homebuilder stocks?

Answer 1

How about some criteria for trying to answer your question - why did home builder stocks go down AND do those same reasons exist or have things changed. Some reasons that I can think of for them going down: rising interest rates - prices went too high - too many houses available - weakening economy.

Valuations have come down - there was too much supply but housing starts have come down - it appears that interest rates have quit being raised. Here is a link to the housing starts report - comes out today at 730 central time.

http://mam.econoday.com/reports/US/EN/New_York/housing_starts/year/2006/yearly/09/index.html

The economy is a wildcard - there are mixed reports as to what it is doing - recent gdp reports have been below consensus.

So have they quit falling - don't we all wish we know - what I can't see yet is a reason for them to go up appreciably. If you want to give it a try - look at the XHB which is a home builders index that you can buy like a stock. The current price is 33.62 AND the low was 28.78. If you are simply trying to do this for a trade, do it with a stop that you can live with - if you are doing this to start a longer term position that you would even consider dollar cost averaging on a decline - the price looks pretty good relative to the chart.

Good luck

Answer 2

To buy for kindling?

Actually, homebuilding appears to have FINALLY bottomed out. You can get into them provided you're disciplined enough to get out if they drop more than 5% from where they are.

Then again, if you're looking at the sector, do you already have some homebuilding stocks in mind? Or were you thinking mutual funds or a holder?

Answer 3

It depends on your time frame.

I think there is more down side left in this sector. The unwinding of the prior uptrend is done, now the stocks will slip when ever economic or job data looks pessimistic.

If you have a long time frame (5+ years), it is time to start researching the various stocks, and determining your entry points. It will probably be okay to SLOWLY start scaling in.

These stocks will be volatile for the remainder of 2006, so they are good short term vehicles.

Answer 4

Find out which publicly sold companies are rebuilding in the wake of Katrina and invest in them.