Just read the whole story on TheStreet.com....there's more then what I posted.
The Federal Reserve's rate cut may have sent homebuilder stocks jumping, but
the rally
already is proving fleeting. Lower short-term interest rates will do little to
help the
beleaguered housing market or the builders.
Wise investors continue to stay away from these clunkers. Their reason: Why put
money
into companies that can't turn a profit, and can only shed homes at fire-sale
prices to
satisfy hefty debt burdens?
Hovnanian's (HOV - Cramer's Take - Stockpickr) weekend "deal of the century"
price cuts
exemplify the sad state of the industry. With the housing market continuing to
deteriorate,
Hovnanian and many other builders are finally paying the price for years of
irresponsible
land buying.
Now price cuts are the only way to clear inventory, and they hold ugly
ramifications that
the lower interest rates cannot solve.
After the Fed's rate cut Tuesday, the Philadelphia Housing Sector Index jumped
6%. It has
already given back ground, falling 0.8% Wednesday, and recently sliding another
2.6%
Thursday.
"I don't really think this Fed cut is going to help the fundamentals for the
builders," says
Alex Barron, senior homebuilding analyst at Agency Trading Group.
"I suspect a lot of people are probably going to use [the post-Fed rally] to
come in and
start shorting the builders again, knowing that all these weekend sales they
are doing is
going to cause them to report more impairment charges over coming quarters."
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