IsThisRight

Housing Risk Factor: Keep an Eye out for December Data

I made the same reasoning last week and will add 2 comments:
1/ HOV showed data that as homebuilder they had substantially decreased their prices ALREADY and existing Home sellers are the laggards in adjusting prices. This input says that new home buyers will buy the comparative value inherent of in new homes. So the HB will be able to liquidate their inventory EVEN if the market rate of sales stays low. The HB just have to stop acquiring or developping NEW LOTS. Lots are abouit 25% of the fixec cost of the homes.
50% is variable cost ( building the home) and the balance is interest on debts and profits.
2/ in 4Q07 KBH sold for $2B worth of homes from inventory. An analyst complimented KBH for this level of sales from inventory. The reading there is that this sales level, eventhough lower than yty by $1B, it is still a higher level of sales than the analyst expectation.
My call: the HB are making bottom here. The duration of the bottom flat curve line is what we should start observing in 1H08 and not expect a V type recovery. But at least some 'rational value' should be assigned to these companies.