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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: UncleBigs who wrote (56553)3/22/2006 5:36:18 PM
From: russwinter  Read Replies (1) of 110194
 
It's all going to depend on housing prices and margins. Their profit before taxes (and including G&A) is about 40k on a 275k house. That's really huge historically. So far they've been maintaining that, as prices haven't really softened that much (apparently?), so that's the bet, more so than a 10-20% slow down in sales volume. The market may already have discounted that, but not margin contraction. If prices received soften 8% (to 255k) relative to costs to produce the same house, there goes half their profits. Cost wise most of these outfits have filled their pipeline with expensive land.
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