NEW YORK ( TheStreet) -- Homebuilder stocks were the market leaders until May 20 when the PHLX Housing Sector Index ( HGX) (170.76) peaked at 210.01, up 22.6% year-to-date at that time. The index set a 2013 low at 164.03 on Aug. 15, down 4.2% on the year and down 21.9% from the May 20 high. The index is now down just fractionally on the year.As the homebuilders rallied into May, my recommended strategy was to book profits on strength as these stocks became extremely overvalued. On May 17, two days before the housing index peaked I wrote, Homebuilders Downgrades Continue. With the builders at or near multiyear highs booking profits was the prudent strategy for investors. I live and work in Tampa, and Florida leads the nation in all-cash home sales at 66% of sales last month. The buyers are investors who convert homes to rental properties, foreign buyers and folks buying vacation homes. This is shutting out entry-level homebuyers, who have difficulty getting approved for mortgages. Banks have a tough time approving mortgages when Florida has the highest rate of foreclosures in the nation, at three times the national average. Higher home prices and higher mortgage rates may have stopped the housing recovery on a dime, at least in some Florida markets. On Aug. 23, we learned that new home sales declined 13.4% in July to a seasonally adjusted annual rate of 394,000 units.
Homebuilder stocks are attempting to build new foundations off recent lows, but two of 11 are rated strong sell, two are rated sell and seven are rated hold. Two have become undervalued, and only four are overvalued by double-digit percentages. Given recent share price declines, the performances over the last 12 months have faded. Four are in the red over the last 12 months, and only three are holding onto double-digit gains. Back at the May highs, all 11 were above their 200-day simple moving averages, when I reflected the risk of reversion to this mean. Today all are below their 200-day SMAs.
Reading the Table OV / UN Valued - The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine. VE Rating - A "1-Engine" rating is a Strong Sell, a "2-Engine" rating is a Sell, a "3-Engine" rating is a Hold, a "4-Engine" rating is a Buy and a "5-Engine" rating is a Strong Buy. Last 12-Month Return (%) - Stocks with a Red number declined by that percentage over the last twelve months. Stocks with a Black number increased by that percentage. Forecast 1-Year Return - Stocks with a Red number are projected to decline by that percentage over the next twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve months. Value Level: is the price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual. Pivot: A level between a value level and risky level that should be a magnet during the time frame noted. Risky Level: is the price at which to enter a GTC Limit Order to sell on strength. Beazer Homes ( BZH) ($17.02 vs. $17.38 on Aug. 16) beat earnings-per-share estimates by 13 cents, reporting a loss of 22 cents a share on Aug. 1. The stock rebounded from $15.54 on Aug. 7 to $18.25 on Aug. 26 and has been trading around its 200-day SMA at $17.26 recently. My semiannual value level is $14.82 with a monthly risky level at $17.71.
DR Horton ( DHI) ($18.10 vs. $19 on Aug. 16) beat EPS estimates by 7 cents, earning 42 cents a share. The company gave a disappointing outlook, and its stock traded at a 2013 low at $17.52 on Sept. 5. My annual value level is $16.05 with a semiannual risky level at $21.19. Hovnanian ( HOV) ($5.04 vs. $5.28 Aug. 16) reported earnings of 6 cents a share this morning, matching estimates. My monthly value level is $4.15 with a quarterly pivot at $5.47 and semiannual risky level at $5.77. KB Home ( KBH) ($16.24 vs. $17.01 on Aug. 16) is expected report quarterly results on Sept. 20 and the EPS estimate is 20 cents. The stock declined to a 2013 low at $15.57 on Aug. 15. My semiannual value level is $12.88 with a quarterly risky level at $17.43. Lennar ( LEN) ($32.25 vs. $33.88 on Aug. 16) is expected to report earnings on Sept. 23 of 46 cents a share. The stock set its 2013 low at $30.90 on Aug. 15. My weekly value level is $29.51 with a semiannual risky level at $35.45. MDC Holdings ( MDC) ($27.65 vs $30.25 on Aug. 16) beat EPS estimates by 21 cents, reporting in late July earnings of 76 cents a share. The reaction high to this beat was $32.50 on Aug. 2. The stock then traded at a 2013 low at $27 on Sept. 5. My weekly value level is $26.32 with my semiannual pivot at $28.44 and monthly risky level at $31.89. M/I Homes ( MHO) ($19.03 vs. $20.70 on Aug. 16) beat EPS estimates by 2 cents, reporting earnings on July 25 of 30 cents a share. A cautious outlook pushed the stock to a 2013 low at $18.25 on Sept. 5. My weekly value level is $16.67 with a semiannual pivot at $19.20 and a semiannual risky level at $22.88. PulteGroup ( PHM) ($15.47 vs. $16.28 on Aug. 16) missed EPS estimates by 3 cents, reporting earnings on July 25 of 26 cents a share. The stock gapped lower, trading at a 2013 low at $14.23 on Aug. 15. My annual value level is $14 with a semiannual pivot at $14.85, and quarterly risky level at $19.37.
Ryland Group ( RYL) ($35.85 vs. $36.31 on Aug. 16) beat EPS estimates by 16 cents, earning 80 cents a share. Even with this beat, the stock traded down to a 2013 low at $33.04 on Aug. 15. My semiannual value level is $33.71 with a quarterly risky level at $41.16. Standard & Pacific ( SPF) ($7.35 vs. $7.65 on Aug. 16) beat EPS estimates by 3 cents, earning 11 cents a share. Even so, the stock continued to slide to a 2013 low of $7.03 on Aug. 29. My weekly value level is $6.83 with a semiannual pivot at $7.58 and semiannual risky level at $8.73. Toll Brothers ( TOL) ($30.44 vs. $31.76 on Aug. 16) beat EPS estimates by 11 cents, reporting earnings of 38 cents a share on Aug. 21. After a slight uptick, the stock declined to a 2013 low of $29.85 on Sept. 5. My semiannual value level is $24.57 with an annual pivot at $31.95 and a monthly risky level at $34.56. At the time of publication the author held no positions in any of the stocks mentioned. Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.