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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: TimbaBear who wrote (2026)	11/10/2003 10:27:03 PM
From: eddieww	Respond to of 110194

Sounds to me like the developer, and then the dev lender (bank? S&L?) are the schlongs on the table. The market seems to be flying so I (developer) decide to build 500 homes on a plot I bought 6 years ago. I try to "pre-sell" as many as I can and collect as much as I can from the homebuyers as advance down-payments and go to my pal at the local S&L for a development loan. While I'm busy building the homes (spending the dev loan money), the bottom drops out of the local housing market, and maybe the local economy too. The units that weren't pre-sold, if I can move them at all, are going to go at a discount to original expectation. Some of those who pre-bought are now unable to proceed due to financial stress. And maybe I had set up a charity to help homebuyers with the down payment. Also, maybe the discount is going to be worth more to the buyer than the down-payment they made, so some of them squeeze me with threats of walking away into chapter 11. If I'm a big outfit like Toll I am in a lot of trouble. If I'm a small-timer, the bank is in a lot of trouble. Except for the "charity assisted" down-payment part, which seems to be a dangerous new wrinkle this cycle, this is basically what happened with a couple hundred high-end beach homes here in SoCal in the early nineties. Their value dropped 30% in a couple months, while construction was still going on. Somebody took a bath, in dirty water.