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

To: John Vosilla who wrote (51562)	4/7/2006 12:14:30 AM
From: renovator	Read Replies (2) \| Respond to of 306849

On a flight to Houston recently I was talking RE with a man who heads a private group with various investments. He was heading to Galveston where they had a hotel/condo turnaround property which was outdoing their projections. They have several similar type projects, mostly in southern locations, FL TX MI NC. On another front, it turns out they had been doing a lot of property purchase/development deals with the larger national builders but were currently quite nervous about the few not yet fully up and running. It seems the builders would locate the desired properties and bring these folks in to do the purchase/development on a fee basis with major payouts over the first 1-3 years of project sales. In effect, the builders were able to offload the cost exposure of the actual land in exchange for less markup on final sales. A beautiful thing for everyone while markets were hot and there was always another buyer but nerve wracking now. He was putting his best face on it, but the previous weekend advertising by Centex listing dozens of heavily discounted finished properties available at each of dozens of developments got his attention. He and his group were anxious for the hard sell approach to clear some of the inventory. The whole discussion made me wonder about the big builder margins. If they have less of the land value profit available and overall pricing is tightening in order to move inventory the builders become even more leveraged to volume in order to make their numbers. I know the production costs are rising( I am a general contractor) because all of the direct costs--materials, insurances, vehicle operations, labor--are up significantly over the last year.