Home building stocks have been crushed this year, some even priced below their raw land values. This industry typically under performs during periods of flat/negative growth. Often times severely so.

These companies have high debt servicing costs. So a slowdown in sales volume (occurs during down markets) becomes prohibitively expensive. This is in contrast with many other industries (oil/agriculture, for example) where companies are able to hedge the price of the underlying asset.

What I'm trying to understand is how homebuilders could/should think about hedging. Is there a viable hedge on sales volume? Their underlying asset's values (land prices or spec inventory in some cases) won't fluctuate too much. Right?

How can homebuilders stay resilient during downturns without unloading assets?

Credit default swaps.

Seriously though nothing can really help them. Inventories are massive for all builders and housing demand really hasnt rebounded as much you would expect since the crash. Everyone’s is expecting massively markdowns in their assets hence they’re all selling under book and the ones with high inventories/working capital are insanely cheap like century.

That being said they continue to be incredibly profitable and seem to be proving everyone’s wrong revenue/earning wise.

Yeah I'm not seeing the impending need to markdown their land holdings/inventory based on earnings and/or sales. At least not to the extent the market is pricing.

But my greater point is how can home builders hedge in a predictably cyclical market? The publics lay off something like ~40% of their workforce during downturns. There must be a way to flatten out earnings, right?

Land value can and does drop by 50% or more. Its what bankrupted the majority of publicly traded builders a decade ago.

Land is valued based on highest and best use, often times that is residential. If inputs (volume in this case) change, so does the asset (land). I still think it's volume driven

I’m pretty sure these land values you are referencing are recorded at lot prices not at purchased price so unless they get contracts to develope houses on them they will never realize that value but I haven’t researched them enough to actually verify. That’s what it was at 2008 that caused a lot of problems for the companies. It’s a weird accounting issue where once they have utilities and land is to the stage where they are predevelopement they get a boost in value that is not their actual value.