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RBC Analyst Bearish on Homebuilders

The S&P/Case-Shiller housing data released Tuesdaydid nothing to change Robert Wetenhall's bearish view on homebuilders.

"We’re expecting home prices to decline another 5 percent to 10 percent year over year," the RBC Capital Markets analyst told CNBC, from a combination of too much supply—seven million homes in foreclosure alone—and a lack of demand from consumers, many of whom are unemployed.

The home-price index showed prices rose in the April-June quarter from the previous quarter, but over the past 12 months they declined in 20 cities surveyed.

The builders universe includes a number of companies Wetenhall covers, including Pulte Homes

, Toll Brothers and KB Homes .

But he said the company in the best position to "react to an adverse operating environment with very severe competition from lower-priced foreclosures" is Lennar.

Lennar , the analyst said, has "a very large distressed investment strategy, so they’re able to supplement and partly offset weakness in the core homebuilding operation due to the success they’re having buying foreclosures and distressed assets."

WATCH:In a recent interview, Wetenhall told CNBC that he thinks "all homebuilders are bad" at this point.

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Disclosures:

Robert Wetenhall does not own shares of the companies mentioned but RBC Capital Markets plans to make a market in some of these securities.

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