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

To: Ramsey Su who wrote (29096)	3/22/2005 1:17:41 PM
From: John Vosilla	Read Replies (1) \| Respond to of 110194

Homebuilders are currently making a fortune due to skyrocketing land residual values in the bubble markets. Easy to make a huge profit when the land was purchased for a fraction of its current intrinsic value. Say a house somewhere in Florida a lot was developed at and carries a basis of $20k in 1999 on a recent large land purchase, cost $75k to build a 1500 sf house and the builder sold it for $115k in 2000. Say the project is now finishing up phase three, the lot basis of maybe $25k after impovements, cost $100k to build and the builder sells it for $250k in 2005. You can see that profit margins have almost tripled. Ask yourself what happens next in these bubble markets as supposedly all the land has been gobbled up and you builders have to pay perhaps 10 times for the land as ythey did in the late 1990's. Things can reverse very quickly and this one has been pumped up far beyond any real estate bubble before in the coastal markets. The midwest is totally different and builders can't make any money. Witness regional builder DHOM.