In the past, I’ve written various posts about shorting US homebuilders. This post look at lessons that could be learned from the experience. I was largely right about which companies were the worst. However, I was hurt by the favorable macroeconomic environment for homebuilders.
In the past 12 months, homebuilding stocks have jumped in anticipation of a rebound in housing prices. So far, the rebound hasn’t even occurred yet! Home prices have stayed roughly flat since 2009.
While I don’t think that I am any good at predicting future home prices, it seems to me that some homebuilders are overvalued. There are some homebuilders trading well above their book value despite being unprofitable. Continue reading
