Homeowners lost $3.3 trillion in the value of their houses last year. A report from Zillow.com, picked up by Bloomberg, said that national home prices dropped 11.6% compared to 2007.

That makes stocks like Hovnanian (NYSE: HOV) and Beazer (NYSE: BZH) sells, even at current depressed levels. HOV shares are down to $1.64 from a 52-week high of $13.50. Beazer is off from a high of $12.40 to $0.98. The company could even face delisting over the next year if it cannot get its share price up.

There is a temptation to think that home-building stocks are so inexpensive that, if the companies can drop inventory prices enough, they can start to improve sales, even if the margins on each home sold are poor. But it is not that simple.

The homebuilding sector collapse has been longer and deeper than even the most pessimistic expected. Prices continue to fall and foreclosures keep rising. With so much supply on the market, the end does not seem near.

The result of the carnage will be a change in behavior that always comes with crisis. The biggest trend I see happening will be with respect to new construction, or, shall we say, the lack thereof.

Homebuilders are operating at historically low levels, meaning less supply on the market. But the assumption that demand for new homes will magically reappear once that supply dissipates is erroneous. Instead, look for homeowners to focus on making do with current stock.

Are you waiting for the malaise in the housing market to finally lift? Of course you are, who isn't? I can't wait for the day when headline news suddenly turns unambiguously positive. And I can't wait for the day when the market as a whole decides to anticipate it. For now, though, we've still got sour data to contend with. According to this article, famous luxury home-builder Toll Brothers (NYSE: TOL), whose competitors include Centex (NYSE: CTX) and Lennar (NYSE: LEN), reported preliminary results for the third quarter on Wednesday that showed a big decrease in home-building revenues. They decreased 34%, coming in at roughly $796 million. Seems par for the course, all things considered.

But there are more declines. Backlog orders decreased over 50%, and net signed contracts took a dive of 35% (both of these metrics are in dollar terms). The company is also issuing write-downs that will fall somewhere between $100 million and $200 million. Depressing stats, but according to the company press release, CEO Robert I. Toll believes that there is pent-up demand lurking out there in the marketplace for homes and he used the fact that total cancellations were down during the quarter as a tool for positive spin. Plus, the home-building revenue number did, in fact, beat estimates, according to Reuters. Does this make me want to run out and buy the stock?

No. Even though the stock has been strong in the last month, and even though it was up nearly 1% at the end of the trading session on Wednesday (a pretty nice showing on an otherwise overall downer of a day), I don't think I'm ready to initiate a position in Toll Brothers. I'd have to see a significant pullback in this one before my interest becomes piqued (some better economic news wouldn't hurt, either).

Disclosure: I don't own any company mentioned; positions can change at any time.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Ryland Group Inc. (NYSE: RYL) is the favorite conservative pick from John Stewart, editor of The Leverage Alert. He notes, "The company, which builds homes and finances mortgages, is seeing its stock start to display positive price action, although many experts are calling for a broader and deeper housing correction.

"Much of the doom and gloom toward the sector seems to have already been priced into these housing stocks as even negative news seems to be shrugged off. RYL's technical picture now looks quite strong as it is trading well above key moving averages, such as its 80-day. Meanwhile, shorter-term moving averages such as its 10-day trendline have provided support for the security during its recent run higher.

"Despite the stock's strength, ample skepticism exists from the Street. Ample pessimism is evident in our quantitative sentiment indicators as well. Options players are quite heavily skewed toward the bearish side of the spectrum.

"A number of traders are betting against the stock by shorting the shares as well. The total number of shares sold short amounts to nearly 20% of the stock's float. As the shares continue their advance, these short sellers may be forced to buy back their pessimistic positions. This could further exacerbate the magnitude of the homebuilder's upside potential as the bears unwind their short positions."

To see John's top speculative pick for 2007, click here.

from www.247wallst.com.....

On Jim Cramer's STOP TRADING segment on CNBC at 2:45 PM EST, Cramer was discussing how to play oil prices dropping and a crock of something.

Now that oil has gone to $60, Cramer said he is tired of torture House game because that homebuilder group was the best performer over last month.

Cramer says Sell alternative energy stocks, particularly Ethanol plays. He says even sell solar power. He is discussing the stocks, not the technology. They showed SunPower Corporation (NASDAQ:SPWR), FuelCell Energy, Inc. (NASDAQ:FCEL), Aventine Renewable Energy Holdings, Inc. (NYSE:AVR), Verasun Energy Corporation (NYSE:VSE), Ballard Power Systems, Inc. (NASDAQ:BLDP). He said he is talking about the stocks, not the company.

Crocs, Inc. (NASDAQ:CROX) is up 6% and Cramer thinks they will preannounce upside to the quarter tomorrow at an investor conference presentation. He likes the closed toe cold weather and Disney deals. He says they are hot and go higher. He also noted for the short sellers to watch out.