Despite rising mortgage rates and tightening credit, the share prices of US House Builders soared Tuesday. Some of the gains were of the nose-bleed variety, such as Meritage Homes (MTH) (+18.1%), KB Homes (KBH) (+14.2%), Beazer Homes (BZH) (+13.3%) and DR Horton (DHI) (+12.2%).
Traders are being told that rates will now come down (despite inflation and the crowding out in the capital markets as banks scramble to recapitalize) and credit will ease (despite special loan departments at the banks working overtime to squeeze their clients).
I think the market is setting up a terrific shorting opportunity in the residential construction companies, and in the weakest banks and dealers.
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I remember when there were a lot of folks on this panel shorting lenders and I think builders. Is that time again upon us?
