I most certainly am shorting homebuilders, and have lots of puts. Fact is, I believe the housing crash will be monumental and am confident the homebuilders will suffer greatly as a result. People can talk all they want about book values and P/E ratios and value investors purchasing these stocks. They are right to some degree, there will be minor rallys along the way, but the long term future of of the stocks is clearly down. When sales, profits and land values drop so will the intrinsic value of these companies stocks.
To keep things simple, I suggest shorting only the XHB homebuilder ETF, it includes 21 companies so won’t be as volatile as a single stock, but in the long run will go down along with the entire industry. For Puts, any major homebuilder is a candidate. I personnally focus more long term such as Jan 2008 and beyond with options prices in the $2.00 range or less. Some of the good candidates I like are DHI, SPF, TOL, PHM and KBH.