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To: gcrispin who wrote (47100)7/4/2006 9:23:05 AM
From: Dale BakerRead Replies (1) | Respond to of 118717
 
The crux of the problem:

"The builder that is still selling in this 62-unit subdivision has decided to spec [homes built before they are sold] the remaining 26 units it has for sale. It is now offering the same unit at $268,900 and is giving $15,000 in incentives plus a year of free gas. This is why we believe in order for the inventories to begin to wind down, it will be necessary for sellers to undercut the builders by dropping their prices below the builders' discounted prices. However, this will require a change in psychology where these sellers are ready to accept a loss. When this happens, the builders will probably see even worse orders than the ones that will be reported in the second quarter of 2006."



To: gcrispin who wrote (47100)7/4/2006 9:42:48 AM
From: Travis_BickleRespond to of 118717
 
I don't really get the book value argument myself, when I look at the builders' balance sheets their book value seems to be made up of receivables and rapidly growing inventory.


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