Hovnanian Enterprises (NYSE: HOV), Comstock Homebuilding Companies (NASDAQ: CHCI) and Standard Pacific Corp. (NYSE: SPF) are three beaten up small caps in an even more beaten up industry: Homebuilding. Earlier this week, the San Francisco Chronicle noted that put volume on the SPDR S&P Homebuilders ETF rose to a six month high after S&P/Case-Shiller index of property values fell 4% in 20 cities – the worst showing since November 2009. However, it should also be noted that the National Association of Realtors’ Pending Home Sales Index (PHSI), a forward-looking housing indicator, jumped 8.2% in May and its up 13.4% since May 2010. Hence, are small cap homebuilding stocks like HOV, CHCI and SPF finally worth considering by non-traders? Here is a closer look at all three to help you decide:

• Hovnanian Enterprises (NYSE: HOV) is a home builder with six market segments: Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West. Yesterday, Hovnanian Enterprises rose 3.30% to $42.19 (HOV has a 52 week trading range of $1.84 to $5 a share) while on Tuesday, 17 block trades on Hovnanian Enterprises shares resulted in a net cash flow of $279,365 into the stock. These trades would indicate that institutional investors have some confidence in Hovnanian Enterprises. However (and one big HOWEVER), it should be noted that earlier this week, Standard & Poor’s Ratings Services also downgraded Hovnanian Enterprises one notch closer to default due to the relative lack of a housing recovery and the company’s purchasing strategy – which is burning through its cash.
• Comstock Homebuilding Companies (NASDAQ: CHCI) is a real estate development company that develops for-sale residential and mixed use projects in the Washington DC area market. Yesterday, Comstock Homebuilding Companies surged 19.8% to $1.21 for no obvious reason (CHCI has a 52 week trading range of $0.90 to $2.07 a share). And while Comstock Homebuilding Companies operates in the Washington DC region, one of the few parts of the company that always seems to have economic growth (at our expense!), it also had a net loss of roughly $1 million last quarter (verses roughly $900,000 for the same period last year) on revenues of $4.6 million verses $9.1 million for 1Q2010. One positive sign: CHCI ended the quarter with $3,842 in cash and cash equivalents.
• Standard Pacific Corp. (NYSE: SPF) is a diversified builder of single-family attached and detached homes in the Arizona, California, the Carolinas, Colorado, Florida, Nevada and Texas. Yesterday, Standard Pacific fell 1.17% to $3.39 and has a 52 week trading range of $2.95 to $4.98 a share. Its also been a short squeeze candidate seeing unusual levels of option trading activity given the ugly state of the housing market. Moreover and for 1Q2011, Standard Pacific’s total revenue fell 18% from $175.4 million to $143.7 million while its net loss widened from $2.1 million to $8.4 million. However, it should be noted that Standard Pacific has taken a longer term view that the US housing market will (eventually…) recover and has been buying up land parcels and opening up new home communities.

The bottom line: Given those ugly housing numbers, small cap homebuilding stocks like HOV, CHCI and SPF are definitely candidates for traders while investors with an appetite for risk who believe there will eventually be light at the end of the US housing tunnel may want to take a closer look.