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

To: Think4Yourself who wrote (57601)	7/12/2006 5:06:08 PM
From: XoFruitCake	Respond to of 306849

I think Elory's theory make a lot of sense. I am not familiar with construction industry, but I see similar scam pulled off in garment industry where someone in the manufacturer would sign a purchase order with higher price per unit and more unit than they needed. At the end, they can fire the guys but the manufacturer has to pay up on the signed contract if the units are delivered. It is very hard to imagine that Len has this kind of cash flow problem and need to stiff the framing guy (and what about other guys? Mish the follow up information also make a lot of sense. All builder has arranged to extend their finance (even my beloved WCI and Joe) in the last 3 to 4 months by upping their credit line etc. Can anyone imagine that LEN use up all their credit line already? Remember all the HB, including LEN, are still closing more housing than ever (even though their future sales drop). So their cash flow would be better than what they predicted at the beginning of this Q. I am surprised that WCI didn't drop more than they did today with the layoff news. May be everyone is expecting it....

To: Think4Yourself who wrote (57601)	7/12/2006 6:40:54 PM
From: mishedlo	Read Replies (1) \| Respond to of 306849

Here is an interesting reply from a subcontractor posting to my blog: The big ramp-up comes because the developer figures that the contractor will settle for pennies on the dollar to come out with something when so much is on the line. With such a large debt to pay the sub will be broken quickly so must negotiate, whereas with smaller amounts the sub will survive and persist in their claim. It is construction made with an enforced discount. I'm in construction and have had the negotiation session at the end of the project where the devoper says that they'll pay 75% now or wait 5 years for your money claim through the court system. For Lennar it achieves more potentially valuable inventory with lower cost on units. It's a last ditch effort due to the burning of subs though. Neal \| 07.12.06 - 6:03 pm \| #