SOURCE: Wealth Daily

February 01, 2007 13:46 ET

Buyer Beware: Homebuilding Stocks on the Brink

BALTIMORE, MD -- (MARKET WIRE) -- February 1, 2007 -- Since their dramatic sell off that began last spring, homebuilding stocks have been on the rebound. On average, homebuilders have made up about 40% of their earlier losses in valuation prompting numerous upgrades from the desks of analysts that believe that the worst of the housing slump is over.

But according to one industry watcher, the worst is yet to come.

Steve Christ, editor of "The Housing 911 Report," says that in reality, "The bottom in housing is nowhere in sight." (You can receive a free copy of Christ's research report, "The Housing 911 Report" here: http://wealthdaily.com/subscribe/546)

Specifically he says just take a look at the words of the builders themselves. "When I want to know about the state of the housing market," Christ said, "I don't put much faith in analysts or bureaucrats. Builders are the ones that know their markets and right now they say that it's one of the worst markets that they have ever seen."

Christ points to recent data to back up that claim.

Last week, Fort Worth-based D.R. Horton announced that its net earnings had plunged 65% as the company took some $41 million in land charges and write offs on options that it no longer intends to pursue. Moreover, orders tumbled 24% and cancellations rose to 33% for the quarter, well above their historical range of 16-20%

At Dallas-based Centex, the news was not much better. Centex announced last Wednesday that it had recorded its first ever loss and that it was planning on laying off 2,392 employees, which comes on the heel of an earlier 17% reduction in the workforce.

It is evidence, Christ says, of a market that is getting weaker, not stronger. "It is clear to me that these builders are scaling back because they believe that their markets have further to fall," said Christ.

"When the CEO of the nation's largest builder says that the building slump is 'in the very early stages,' it's a strong signal for the buyers of these stocks to beware," he said.

Steve Christ is an editor for "Wealth Daily," an investment advisory service that reports on wealth building strategies based on prevailing and obscure trends in the financial markets. "Wealth Daily" is published by Angel Publishing.

This report was filed by Jennifer Husson, a frequent contributor to the e-letter "Wealth Daily." Readers may receive a free copy of "Wealth Daily" and Christ's most recent research report, "The Housing 911 Report" here: http://wealthdaily.com/subscribe/546

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