Joe Friday

As Housing Market Struggles, Homebuilders Focus on Survival

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.

Homebuilder ETF Rises Despite More Bad Housing News

I am on the bear side of this debate as well. One would not buy this index today unless you thought we were near a bottom in the housing decline. Even if you are a long term holder, you still want to enter your position when it is most advantageous (ie cheapest). There is no indication that the housing market is anywhere near a bottom. All indicators show that there is much more pain to come, and many of these homebuilders will default on their loans, resulting in the total elimination of their 'equity'. Buy the index if you believe we are close to a bottom, otherwise, avoid it.
I beleive many of these HB stocks will not survive.
Question for discussion, which one of them is most likely to default. My premlinary thought is CTX. Lots of land inventory in terrible markets, and 60% leverage on the balance sheet. Other thoughts?