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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (25905)	12/13/2004 12:40:44 AM
From: mishedlo	Read Replies (1) \| Respond to of 306849

The flaw in your belief, that Home Builders make more money when land prices decline, is two-fold. First Home Builders have large land inventories on which they take enormous losses if land prices decline. Second, the demand for homes declines precipitously when home prices decline. Many people with more homes than sense unload into the declining market. Damn, you burst my bubble. I thought it was a perfect never fail business that always made money no matter what happened. Mish

To: Elroy Jetson who wrote (25905)	12/13/2004 7:41:37 PM
From: John Vosilla	Respond to of 306849

<First Home Builders have large land inventories on which they take enormous losses if land prices decline. Second, the demand for homes declines precipitously when home prices decline. Many people with more homes than sense unload into the declining market> It is laughable to think skyrocketing land residual values, 50 year low interest rates with the loosest underwriting standards in history won't have the opposite impact when those trends reverse and become a negative. Anyone very familiar with the last 1990-95 bust knows how tough it can be on the downside for anyone heavily leveraged in investing or development. This one when it bursts will be much worse.