Is the Homebuilding Stock Runup Over?

The conjunction of rock-bottom stock prices, declining interest rates and historic levels of short interest led to the recent surge in the homebuilding stocks. Hovnanian Enterprises (HOV), Beazer Homes USA (BZH) and Standard Pacific (SPF), three of the most financially distressed homebuilders, have surged 31 percent, 50 percent and 42 respectively since January 22. Today the stocks closed down, the first down day in the last eight trading days.

Is the current short squeeze over or have the homebuilding stocks started their next sustained upside move? The fundamentals of the housing market remain gloomy as do the business prospects for the homebuilders. I (RAH) have no positions in the homebuilding sector, and I plan to remain on the sidelines until the homebuilders become less shaky.

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Homebuilding Stocks
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Selling Short

Posted January 30, 2008.