Fargo will not Bring US Housing Market and Homebuilder Stocks Back (PHM, DHI & BZH)

Home builder stocks have rebounded strongly with PulteGroup (NYSE: PHM), D R Horton (NYSE: DHI), Beazer Homes (NYSE: BZH) and the SPDR Homebuilders exchange traded fund (NYSE: XHB) all up.  The was has risen more than 30% in the three weeks after hitting a low of $12.30 in early October.

As detailed in many prevous articles, this is an opportunity for profit.  Homebuilder stocks are weak as the US housing industry is even more tepid.  As reported in a recent article in the Financial Times, Citigroup analyst Josh Leven released a note stating that "the structural excess supply of homes is exhausting itself. 

Every major housing market in the US is weak and getting weaker.  In a report from the management and valuation services firm Veros, the five best performing real estate markets for the US in 2012 are projected to be Bismark, North Dakota; Honolulu, Hawaii; Fargo, North Dakota; Harrisonburg, PA; and Pittsburgh, PA.  With all due respect to those who see the US housing market rebouding, Fargo, North Dakota is not going to the be the engine that brings it back.

In a previous article on www.smallcapnetwork.com, it was detailed how John Markman of MSN Money recommended home builder stocks back in late 2006 as they were bloody cheap.  Federal Reserve Chairman stated in the Spring of 2007 that the dip in the housing market would be shallow and short-lived, around 90 days later.

Beazer Homes provides an excellent example of why people who have bought homebuilder stocks have lost dramatically.  Since February 2007, there have been 13 analyst recommendations issued for Beazer Homes.  In February 2007, Wachovia Securities initiated coverage with a positive recommendation of "Outperform."  Since 2007, Beazer Homes has fallen from over $47 to around $1.90.  Of the 13 analyst recommendations issued over almost the last 5 years, not a single one was a "Sell" as Beazer Homes lost more than 90% of its share value.