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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 (57622)	7/12/2006 8:26:25 PM
From: Dan3	Read Replies (2) \| Respond to of 306849

I do not understand this - at all. There should be quite a lag between the time when sales start to slow and when the homebuilders stop doing well. The reason is that homebuilders are collecting profits now from sales that were made 6 months ago to people who locked in their mortgage rates 6 months ago. But - during what should have been a great year - KBH cash is down 91%, from $106 million to less than $10 million. What's a lot worse, is that even after draining their cash to nearly zero, their accounts payable and accrued expenses are up 53% from $1.6 Billion to $2.5 Billion, while receivables are up only 16% from $534 million to $620 million. Sure, these guys are carrying $7.5 Billion in inventory, while they only show $6.2 Billion in total debt, but they first have to sell that inventory at those prices to get that as cash and meanwhile, they're all but broke - they have almost no remaining cash. If the value of the land and homes they hold as inventory is actually worth 20% less than they think - these guys are insolvent! How the h@ll could that be the case NOW - just as they're ending one of the greatest 5 years builders have ever seen? I don't understand it. Am I making some huge mistake in reading their balance sheet? google.com