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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Elroy Jetson who wrote (6100)5/11/2004 10:10:03 AM
From: mishedlo  Read Replies (1) of 116555
 
Turns out I have a small spec homebuilder on my board as well. ItGoesToEleven confirms what you said:
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"Major home builders did not go bankrupt in the early 1990's by building spec homes. They went into bankruptcy by buying too much land, which a year or two into the downturn was worth 1/3 of what they had paid for it."

Correct. Land is inventory that makes no payments. Combined with the S&L meltdown, debt-laden builders, short of cash-flow, stared liquidity in the face and lost. That's why so many are "public" now, why deal with bankers debt demands when you can offload that risk on shareholders equity?
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