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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (6089)	5/11/2004 1:56:32 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 116555

Major home builders did not go bankrupt in the early 1990's by building spec homes. They went into bankruptcy by buying too much land, which a year or two into the downturn was worth 1/3 of what they had paid for it. William Lyon, once one of the wealthiest men in America (check the Forbes Listing prior to 1990) was the largest owner of undeveloped land in California. He lost everything in bankruptcy and his home building firm William Lyon Homes went out of business. He and his Son started a new William Lyon Homes, a small two person business. Presley Development wanted to hire Bill Lyon as their CEO and graciously "merged" his two man company with the huge Presley Development, later changing the name to William Lyon Homes. He owns something like 1/2 of 1% of the company as a result of his stock options. Kaufman & Broad went bankrupt in the early 1990's, although their website coyly refers to "over thirty years of heritage" in the home building business. Very few firms survived. While homes may fall in value some 30%, undeveloped land declines by 2/3 or more in a downturn. Just since January most of the large firms went on a land buying binge. It's going to put them out of business when the downturn arrives, probably later this year.