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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: patron_anejo_por_favor who wrote (57739)7/15/2006 4:01:46 PM
From: Elroy JetsonRead Replies (5) of 306849
 
Look for large "extraordinary write-offs" from the publicly traded home builders in their next quarterly reports.

For the past several months, large home builders have been letting much of their optioned land expire. That's old news.

Now, I have not been able to find one large builder that has not been selling their owned land inventories as quickly as they can. The part which is shrouded in mystery is who the buyer would be and at what price. Some smaller privately held builders, and some wall street funded investors is what I hear. The mark-down would have to be significant to move land in the current climate.

Coupled with the sell-off in land inventory comes a reduced production forecast and a reduction of at least 20% in the number of employees. In the field, this will result in a higher percentage of lay-offs - as this is where most of the cut-backs will be focused. Most of these lay-offs have not yet been announced to the employees, but are in progress.

All of this will lead to write-offs for the loss on the land sales and the lay-off costs.

Things are collapsing much faster than they did in 1986 to 1996 downturn. Some think the public builders are over-reacting. But with their land inventories of a couple of months ago, relative to their debt, a 20% decline in land prices would have eliminated shareholder equity.
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