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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: LLCF who wrote (29170)	3/23/2005 9:08:02 AM
From: Ramsey Su	Read Replies (1) of 110194

DAK, yes, building can dry up but it will not be bone dry. There will always be some activity unless you expect the mother of great global depressions. In the old days, the builders get killed for many reasons. e.g. it used to far more prevalent to build at least some inventory before having a contracted buyer. Construction loans, including land draw, are all on the hook awaiting this buyer. When that did not materialize, everything came tumbling down. Today, the builders can simply stop building and obligations became minimal. When speculative markets finally collapse, you will find a lot of messy unfinished projects that the smaller private builders simply cannot complete. Just like the daisy chains during the S&L fiasco, these projects are going to end up in the hands of lenders who do not have the expertise to finish them. The textbook work out would be to find a capable partner or take the lumps and sell at market price (under very unfavorable conditions). I suspect the collapse of the early 1990s actually provided the foundation for today's homebuilders. Ramsey

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