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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Jim McMannis who wrote (12803)	10/4/2004 8:16:43 PM
From: Elroy Jetson	Read Replies (1) of 116555

Pulte wasn't part of the consortium of bidders for the BLM tract in Henderson with Pardee et al. > But only because Pulte was paying the same price, buying entire BLM tracts all by themselves! google.com While other builders are splitting up parcels to limit their risk, Pulte has floored the accelerator picking up huge tracts all alone or with one other partner. Essentially all builders are currently paying land prices which are uneconomic at current home sale prices. They are gambling that when the homes are finally built in 2 to 3 years, home prices will have increased enough to make the project profitable. Of course when the end of the cycle comes, the raw land they own has not appreciated by the 35% they need to break even, but rather has declined by 85% to 95%. This is why virtually all home builders file for bankruptcy at the end of each building cycle. Every new cycle home builders blow smoke about having sophisticated new risk management programs -- that ultimately amount to nothing.

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