Is it time to start shorting homebuilders? ZeroHedge thinks so.

First a little background: Housing starts fell to a three month low of 1.126 million in August, missing expectations of 1.116 million, and below last month's downward revised 1.161 million.

But homebuilders remain supremely confident, with a survey of confidence hitting a 10-year high in September.

“The new-home and rental markets continued to have significant pent-up demand, which positions us well for years to come,” Lennar Corp. (LEN) CEO Stuart Miller said in a statement related to the company’s third quarter earnings, released on Monday. “While our homebuilding business continues to be the primary driver of our quarterly earnings, we are in an excellent position across our multiple platforms.”

But here’s what ZeroHedge had to say:

Last month, I posed the question “Is it time to short the home builders?”  My conclusion at the time was pretty much a “wait and see”.  Circumstances have changed.  I believe the builders are now short candidates.

In conclusion, the risk/reward ratio appears to highly favor shorting the builders.  Unless the Yellen Fed comes up with a big surprise, I think shorting rallies will be the way to go.  As for particular stocks, I am not sure if it really matters, just short a basket.  Finally, as a reminder, these rants are for the purpose of organizing my own thoughts and should not be confused with investment advice.

Read the whole thing here.