“It's a crucial time for the homebuilders. Rates have spiked huge here. That was not in the cards for them. They are not set up for that. We still have not had a major bankruptcy of a homebuilder. That's one of the reasons why we have not seen the stoppage of homebuilding.
Look, let's be honest. We have no need for new homes in this country. None. We do not need Beazer (BZH), Centex (CTX), Horton (DHI), Hovnanian (HOV) or Pulte (PHM) to be building homes.
We can't get a bottom in homes as long as Lennar (LEN), Standard Pacific (SPF) and Ryland (RYL) can still build. But build they must to be able to stay in business and meet cash flow covenants. The darned banks keep these companies alive with endless forbearance because they don't want to take a hit. The bank/housing company nexus is killing any hope that housing prices can stabilize.
Because of their need to hang on and build, we are not able to work off the inventory. We can't. I hate to root for any company's bankruptcy. But we just aren't going to get to where we have to go, which is as close to no new housing starts as possible, in order to get to the bottom and no more house price depreciation.
These homebuilding stocks have now become the enemy. With rates up and them still pumping, we are going to have another big round of price depreciation.
I reiterate that housing will bottom next year. Integral to my forecast are four things:
1. many homebuilders failing;
2. tax credits to get people to buy homes;
3. lower mortgage rates; and
4. a 25% decline in home pricing.
We need all four to happen.
We just lost three. We will not have a bottom unless we get No. 1.”

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chart

Will Recover

kow priced

Homebuilder knocked way down too

In the homebuilding space, Cramer now likes KB Homes (KBH) and Centex Homes (CTX), but feels Beazer (BZH) is "still too troubled."

potential gain

That's what happens when you bet against a Hovnanian or a Beazer like everyone else does.

Beazer Homes is a Fed rate cut play off the idea that a rate cut will be precieved as helping the subprime mortgages and the housing sector in general. With a huge 90% of the float short combined with Hedge Fund Citadel Investment Group recently taking a 5.7% stake I see a very good potential squeeze..

Kept expanding into market colapse.

chapter11

chapter11

Been shorting forever. Sold my MTG puts way too soon.

My vote for first HB to go under.

will be insolvent within 2 years

Beazer is going down. Why? Let me count the ways. The housing slump? Sure, they have unsold inventory in some of the worst markets in the US. The credit crunch? Sure, fewer buyers and those can't get good mortgages. Problems with their mortgage division? Yeah, SEC investigations and exposes in the Charlotte Observer. Lying to customers? (see CO story) employee problems? SEC problems? Lawsuits piling up at their door? delayed SEC filings? Geez. Add it up.

Pick any home builder. but the other extracurriculars may bury this one.

worst builder ever

Bought depressed stock. Hoping housing would come back.