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Shorting the Homebuilders as Their Stocks Surge

Having read only half the posts I think we are missing a fundamental point. The developers appreciated in price because there was demand for a massive glut of new homes, in addition due to fancy financings we created a system that allowed developers to inflate prices, which is why their stocks did so well over the past years.

The biggest result of the past 7 years is that we've now produced an incredible amount of new homes on the market and no longer have a system inplace to create artificial demand. New and now old supply (created by foreclosures) will leave the market with ample demand.

Resulting in a dramatic decrease in business for home developers - you'll see industry consolidation and then in enough time when the country sees real GDP growth or loose credit another housing market boom will take place.

But for now, buying home builders is a pure momentum play.