Homebuilders: Bargains or Value Traps?
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The past two weeks have been a nightmare for homebuilders. Shares in just about every company in the industry, from Hovnanian (NYSE: HOV) to Pulte Homes (NYSE: PHM), are selling at prices not seen since before the housing boom began. Listen in on the USG (NYSE: USG) conference call, and you will get a clear indication of how painful things are in the housing industry. Listen in on the Countrywide (NYSE: CFC) conference call, and you will know how dire the mortgage situation is becoming. Basically, everything that could go wrong in homebuilding, is going wrong. There is an oversupply of new and existing homes. House values are dropping by rates reminiscent of what happened in the Great Depression. Mortgages, both subprime and now even prime, are defaulting at accelerating rates.