Powayseller, have a look at the price chart for TOL US (Toll Brothers), one of the largest listed US homebuilders. Beginning in the Summer of 2005 investors dumped this thing, and continued to do so until a few months ago. Investors have known about the current housing slowdown for well over a year, and unless things get MUCH worse from here, TOL will probably trade sideways, even drift up. The newsflow on this stock and US housing markets in general has been bad, certainly, but it’s not been nearly bad enough to spook the current holders of the stock.
Surprises move stocks…to go back to the TOL US example, the current holders of this name (including Neuberger Berman, Goldmans, JP Morgan, T. Rowe, Vanguard, etc) probably aren’t going to wake up tomorrow and say to themselves, “Sweet Jesus, there’s a mild housing slowdown in the US — who knew? I’d better dump my Toll Brothers position ASAP!”
If you’re short the homebuilders, you need an absolute collapse (ie, prices down 25%+ in a year) in housing on a nationwide basis to make money…the mild decline in prices we’re seeing won’t do it.
