These 3 Real Estate Stocks Are Looking Cheap, but Are They Actually Worth It?
The entire real estate industry is down this year and home builders have taken as big of a hit as any industry. Many of the most successful home builders are trading at single-digit price-to-earnings (P/E) ratios, and some are even trading for a P/E of less than 5. Normally, a P/E below 10 would be a strong buy signal for value investors.
But there's one problem.
Home builders are traditionally cyclical stocks. During expansions, when interest rates are low and home buying is rising, they make a lot of money and have higher earnings. When the cycle turns, like it has over the past few months, earnings go way down. It's possible that the market is just anticipating bad earnings in the future and home builders are a value trap.
Source Fool.com
