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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Think4Yourself who wrote (48700)2/18/2006 5:44:09 PM
From: GraceZRead Replies (2) of 306849
 
They have almost an ideal lots held to controlled ratio for this point in the cycle at 2:3. Their inventory did build significantly (I think the pre-construction speculators bailed on them) and their unrestricted cash fell significantly, but they still have a very healthy portfolio of loans they could sell off to raise cash and they have a lot of profit on each house sold to cushion any price concessions. They would drop their buy back plan and dividend long before running out of cash. I think the fact that they are being aggressive in dropping inventory levels, is a good thing. The guy who does this the fastest when the music stops survives. Ryland does this as well at the very first sign of weakness, it is how they survived the last downturn which was pretty intense and lasted quite a few years. The ones who acted like business as usual ran out of cash and eventually got bought up by the strong at a discount.

Still, while I don't think Centex is a BK candidate regardless of what the chatties here seem to think, your puts might still be good. Homebuilder's stocks typically get cut in half in the first down year, no matter how strong their financial situation might be.
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