Dr. Duru

As Housing Market Struggles, Homebuilders Focus on Survival

Joe:
You are 100% correct. Several builders essentially said they are liquidating as fast they can. That's why I said if the builders can survive through 2009, they will come out with good balance sheets. But after that? If demand hasn't picked up by then, we will likely see new financial problems for the remaining builders.


On Feb 17 04:50 PM Joe Friday wrote:

> Good Article. The one remaining piece of the puzzle after one analyzes
> the cash position of each builder, is determining when their loans
> mature and the cash balances start to decline. The cash builds are
> really the result of the homebuilders selling their inventory and
> not reinvesting the proceecds. Rather they are buidling cash in the
> hopes it will last long enough to get them through the storm. It
> is the equivalent of "burning the furniture to stay warm'. The builders
> who have large debt maturities in these next couple of years, may
> find it hard to survive.

As Housing Market Struggles, Homebuilders Focus on Survival

Hi Daniel:
A government-sponsored halt in foreclosures will serve to prop up prices (temporarily?) but will not alone encourage home-buying. Prices likely need to fall further before demand shows more life.

I think most analysts expect the housing recovery, whenever it happens, to be very slow. A lot of damage has been done, and it will take a lot of time for repair.


On Feb 17 05:56 AM Daniel Herkes wrote:

> Good analysis. A couple of questions.
>
> " . . . You've got markets like Las Vegas, for instance, where 60%
> to 70% of the resales are now either short sales or foreclosures."
> Will the halt in foreclosures depress the prices to the point that
> a potential buyer will look to a house only as a domicile? Prior
> to the recession, houses were discretionary purchases, i.e. the McMansions.
>
>
> " . . . sacrificing margins for sales" Since the builders are sitting,
> and not adding to the surplus, will the next housing trend be so
> marginal as to be trivial?

As Housing Market Struggles, Homebuilders Focus on Survival

Hi Jane:
I have indeed written in the past about the alleged mortgage fraud at Beazer Homes (BZH). I am also painfully aware of construction problems with builders as I, along with friends and family, have all suffered a myriad of problems. I look forward to seeing more detailed stories on the darker side of the business.


On Feb 17 05:45 PM Jane wrote:

> It is amazing how many experts write articles on homebuilder stock,
> the new home market, etc, without ever mentioning that factors that
> just MIGHT matter include: rampant shoddy construction and code violations;
> worthless warranties; abusive arbitration clauses; hidden complaints
> due in large part to arbitration clauses; builders having a big part
> in creating a housing bubble with artificially inflated prices and
> mortgage fraud, and so on. These problems, despite being ignored
> by mainstream media and many "experts," exist and have had a hand
> in the current economic problems...more than most casual readers
> know. I doubt the casual reader of economic information realizes
> that six of the big builders were fined last year alone, (plus I
> don't know how many smaller builders), for lending law violations.
> Despicable that they just pay a fine instead of being really held
> accountable for their hand in this mess. That's just one example.
> Investors who are really doing their homework would do well to research
> and consider these things. If they had, perhaps many Americans would
> not have seen their investments go up in smoke by leaving their retirement
> funds in the hands of "experts" who failed to "see the housing crash
> coming." Many saw it coming,and warned. Far too few experts paid
> attention.