Pulte My Finger

As expected, it was a humbling quarter for Pulte Homes (NYSE:PHM). The homebuilder posted a loss of $0.03 a share on a 14% decline in consolidated revenues for the December quarter. That is a stark contrast to the $2.03 per share in profitability that it had generated a year earlier. The company is also looking to lose money in the current quarter, or in the best case scenario, simply break even. Analysts were looking for a $0.15 per share showing.

It's not good. Fewer homes are selling at lower prices and that's a margin-crushing disaster for real estate developers like Pulte. For all of 2006, earnings fell to $2.67 per share. That's less than half of what Pulte earned in 2005.

As a telling sign that homebuilder vision isn't exactly 20/20, back in June, Pulte was looking to earn between $4.70 a share to $5.00 a share in 2006.

Maybe that's why I'm skeptical when I hear homebuilders call bottom. Earlier this week, lender Countrywide (NYSE:CFC) noted that 2007 "will likely be the trough year of the current housing cycle" with 2008 representing "the beginning of upward trends associated with the next cycle," but color me skeptical.

Backlogs are still diminishing at homebuilders, and cancellations continue. Over at Pulte, the company is closing out the period with a backlog of fewer homes -- and at home sale prices that are $5,000 lower -- than at this point last year.

How much more excess will need to be worked off this market? A lot. Will the slump create sector consolidation? Probably, and that's one thing that will make this bearable, as the remaining players will likely be stronger players on the next up cycle.

This will help position some of the stronger players like Centex (NYSE:CTX) and Hidden Gems recommendation MDC (NYSE:MDC) for the eventual recovery. When will that recovery happen? The only thing I know is that the least credible sources on pegging a turnaround are the homebuilders themselves.

Hoping to score a great housing deal thanks to the glut of homes on the market? Do check out our Home Center before you start hitting the open houses.

Longtime Fool contributor Rick Munarriz has been living in the same place since 1999 -- but he did refinance twice when borrowing costs got dirt cheap. Rick does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.