The slowdown in the Washington, D.C., housing market has hit Comstock Homebuilding ( CHCI) especially hard, but patient investors could see their recent burns soothed if real estate rebounds. Last summer, things looked rosy for Comstock as it rode the wave of the red-hot housing market in the nation's capital, where the small-cap builder receives the bulk of its revenue. Management's bullishness was evident during the company's second-quarter earnings conference call in August. With Comstock's stock flying as high as $29, CEO Christopher Clemente dismissed reports about signs of a housing slowdown in the region, and the company boosted its 2005 forecast. In coming months, however, management would slash its guidance several times, as the D.C. market clearly began slowing down. The stock has since fallen 68% off its 52-week high hit in August. Around $9.50, Comstock now trades about 7% below its book value of roughly $10.29 a share. The company went public in December 2004 at $16 a share. "It's a management credibility issue. That's the bottom line," says Christopher Lucas, a R.W. Baird analyst. Nonetheless, Lucas rates the company outperform and thinks shares are "somewhat undervalued." (R.W. Baird was a co-manager of Comstock's IPO.) However, Lucas doesn't expect many catalysts for a short-term pop in the stock. "They have a lot to learn as it relates to dealing with the investing community," says one fund manager who invests in the stock and asked not to be named. "They need to improve their communications, and the stock could easily go back to $16 without anything changing." To send the shares higher, investors also need to believe that the housing market eventually will recover in Washington. The area is seen as a great long-term housing market; last year, the region produced 80,000 new jobs.