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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: koan who wrote (77806)4/16/2008 8:54:33 PM
From: Elroy Jetson  Read Replies (1) of 116555
 
I agree that declining building costs could easily justify a 50% decline in home prices.

The real estate bubble put enormous pressure on building costs and as that bubble has faded into history, so has the cost pressure . . . and prices have tumbled.

1.) Developers are selling entitled land holdings for 80% less than their acquisition cost. Land makes up more than 2/3 of the price of most homes and price declines will pick up intensity as the downturn progresses.

2.) Subcontractor bids to home builders are coming in 50% lower than they were a couple of years ago.

3.) USG says they have lowered Drywall prices from a peak of $192 to $141 last year and expect price to decline to $95, so that's a 51% price decline.

4.) Let's look at those rising lumber prices! Down only 40% so far, but the downturn is in the early innings.



There are other costs and I could go on . . .
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