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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 (54635)	5/22/2006 4:21:14 PM
From: Wyätt Gwyön	Read Replies (3) \| Respond to of 306849

well, the difference in the land price on the books is a "sunk cost" and once the land is used up that part of the large builders' advantage goes away. however, a difference of $135 vs. $300 per sf in construction costs does not go away. that is huge. i wonder how small-time builders can even compete. perhaps in the unfolding housing bust, the small builders will be wiped out for good and the large builders will gain a much larger market share (isn't it only around 30%?). that secular bullish factor--plus the low PE multiples--has kept me from wanting to short builders. maybe the best move here is to figure out which ones will survive and thrive, and be positioned to buy them at low prices a few years down the line.

To: Elroy Jetson who wrote (54635)	5/22/2006 10:42:05 PM
From: John Vosilla	Read Replies (1) \| Respond to of 306849

Sounds like the general public buying new homes as an inflation hedge are even more screwed in areas where prices have skyrocketed and there is still a ton on land to build on (Vegas, Phoenix, Orlando?)than built out bubble areas with no more land to build on. I imagine Marshall and Swift doesn't use the production cost model of the national builders then? You mentioned pushing out product in Houston 2 years ago with razor thin margins. How can they possibly still do that in Houston or Indianapolis at $45 psf today given how much construction costs have risen in the past two years? The divergence in costs you quoted is shocking. I always figured cost savings were more along the lines of Walmart versus a mom and pop retailer. Any sources on the net to confirm some of this?