Yesterday’s existing-home sales news was mixed.

Existing-home sales were up 3.1% in July. But the sales rate was still 13.2% below a year ago. Meanwhile, inventories spiked 3.9% from last month to a record 4.67 million homes for sale at the end of July – 11.2 months of supply at the current prices.

The sector’s drubbing could be a great opportunity for value investors. But Ian Davis in The Growth Stock Wire advises investors to hold off on bottom fishing for homebuilders…

Predictably, homebuilder stocks dropped on yesterday’s existing-home sales news. The SPDR S&P Homebuilders (AMEX:XHB), an ETF that tracks the sector, dropped 1.3%. But Ian says there could be more bleeding in this sector yet.

The value may already be there, but the situation is still murky. For starters, most of these companies don’t have any earnings right now. Therefore, we can’t use price to earnings (P/E) as a guide. Instead, let’s look at the sector’s price-to-book value.

As you can see, in terms of book value, homebuilders are dirt-cheap.

Thing is, Datastream only updates book value on a fiscal year-end basis. Since all of the homebuilders in the index have fiscal year-ends between October and December, these book values are at least eight months old (most big builders are showing price-to-book values around one according to second-quarter reporting).

The median price of a new home is down 5.6% since 2007’s fiscal year-end, so you can bet that homebuilders’ book values will be revised lower in December.