By Chip Hanlon 

I can't believe how many people are still looking at the homebuilders, trying to figure out when they'll be a good buy.

Exact timing (and today's rally in the group) aside, the short answer to that question is: not yet.

Normally, I'd like the idea of buying the down-and-out sector from a contrarian standpoint, but the fact that so many people are asking whether homebuilders are worth trading suggests a real negative sentiment extreme hasn't yet been reached in this group, as amazing as that sounds.

Fundamentally, I've made a point of talking with some high-end real estate attorneys in our area, folks who have seen a few real estate cycles and know these businesses intimately. The biggest takeaway from those conversations?

In real estate downturns, many homebuilders simply go out of business.

I don't think most investors truly appreciate this fact since such outcomes weren't so visible in last real estate down turn in the early 1990's--this is the first housing bear market in which there have so many publicly traded homebuilders.

Case in point: Standard Pacific Homes (SPF), which has seen its stock get clobbered from a high of $50 two years ago down to $5 today. Down 90%, shouldn't it be a great buy right now? The rumor around here among industry pros is...click here to read more "Stop Bottom-Fishing the Homebuilders" at GreenFaucet.com