Homebuilders Bulldoze Real Estate Funds

Homebuilders are suffering under a heavy debt load while falling existing-home prices push up the inventory level of new, unsold homes.

Billionaire Carl Icahn's WCI Communities (WCI Quote) had its share price halved again this week as investors anticipated that the company might have to file for bankruptcy if it can't borrow again in order to avoid defaulting on its $1.9 billion in debt. The decline comes after the stock had already lost more than 90% of its value in the last year.

Shares of other homebuilders followed suit, unnerved by another weak reading on the housing market. With pending home sales falling 2.6% in November, according to the National Association of Realtors' index, the supply of previously owned homes is up to 10.3 months worth of home sales.

Excluding the two funds that short the real estate sector, the shifting economic sands eroded 3.56% from the average fund over the five trading days ending Thursday. The falling shares prices of homebuilders have real estate funds, centered on that niche, sinking in quicksand. ...