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Us Crash Gathering Speed As Home Builders Ditch Stock

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Bulls and Neithers do not read because you will just get wound up because the US is not comparable to the UK because of supply issues.

For those that have read enough around the subject it is just another clue as to what things will be like in a years time here.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Oct. 5 (Bloomberg) -- When D.R. Horton Inc., the second- biggest U.S. homebuilder, couldn't sell the one-bedroom condominium in San Diego it listed for $349,800, the property was auctioned as a last resort for 37 percent less.

D.R. Horton, with annual revenue of about $11 billion, and Hovnanian Enterprises Inc. now face the worst choice in the worst residential real estate slump since the 1930s. They're selling homes at any price they can get.

``It's desperation time and some companies may not make it,'' said Alex Barron, an industry analyst at Agency Trading Group Inc. in Wayzata, Minnesota. ``At this point in the housing cycle, if you have too much debt, it's hard to get out from under it.''

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Bulls and Neithers do not read because you will just get wound up because the US is not comparable to the UK because of supply issues.

For those that have read enough around the subject it is just another clue as to what things will be like in a years time here.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Oct. 5 (Bloomberg) -- When D.R. Horton Inc., the second- biggest U.S. homebuilder, couldn't sell the one-bedroom condominium in San Diego it listed for $349,800, the property was auctioned as a last resort for 37 percent less.

D.R. Horton, with annual revenue of about $11 billion, and Hovnanian Enterprises Inc. now face the worst choice in the worst residential real estate slump since the 1930s. They're selling homes at any price they can get.

``It's desperation time and some companies may not make it,'' said Alex Barron, an industry analyst at Agency Trading Group Inc. in Wayzata, Minnesota. ``At this point in the housing cycle, if you have too much debt, it's hard to get out from under it.''

...relax ...I'm an 'neither' as saw all this in the 88-95 crash....in early '88 I advised all to get rid of their mortgages ...I did ....those who did not said in '91 ...'how did you know?' ....today is not a good time to have a big mortgage....I have my '88 feeling.... ;) ....never had a mortgage since '88... ;)

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Some pretty impressive drops there.

And remember, the homebuilders will set the tone for the whole market - they can't try and sit it out like your average seller so they have to find the market price for all their stock. The market price looks to be 20 or 30% off already.

Oh, and their boom's nothing like ours so who's to say it won't be 30 or 40% off over here this time next year?

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It's taken around 6 months to a year for this situation to go from a blip, to a situation comparable with the 80's bust, to one comparable with the 30's.

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Some pretty impressive drops there.

And remember, the homebuilders will set the tone for the whole market - they can't try and sit it out like your average seller so they have to find the market price for all their stock. The market price looks to be 20 or 30% off already.

Oh, and their boom's nothing like ours so who's to say it won't be 30 or 40% off over here this time next year?

I don't understand this. Homebuilders happily making good profits. House prices triple. Builders pocket the money. House prices drop 50%. Why wouldn't builders just keep building and making more profits than they were when they started?

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mghtytharg

Here's an explanation.

http://www.moneyweek.com/file/2273/housebu...e-collapse.html

In the event, even those figures were too high. Housebuilders are strongly geared to the economic cycle, which means great profits in good times. But things can turn nasty fast. If the cycle turns, they can face falling land-bank values, rising debt-service costs, rising wage costs and falling final prices. They lose money if they sell stock at knock-down prices, but if they don’t sell, they lose even more. In short, they suffer the mother of all margin squeezes.

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I don't understand this. Homebuilders happily making good profits. House prices triple. Builders pocket the money. House prices drop 50%. Why wouldn't builders just keep building and making more profits than they were when they started?

Errm...

Imagine a shop full of trousers you've just made.

Nobody wants to buy them any more. In fact, if you sell them at less than they cost you to make, still not many people want them. That's because they know the cost of cotton is falling through the floor and there's a glut of trouser shops so they'll probably be even cheaper next week.

So, would you go and make more trousers that you've got to fill cupboards with and the moths eat when you're not looking or would you ditch the current stock, sack the assistant and the bookkeeper, get a smaller shop and hope to high heaven that by the time you've done all that people want your trousers again.

It doesn't take an MBA to work out which solution has a hope of working...

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Prices – If you believe anyone telling you prices are stabilizing, or even showing signs of stabilizing, you are either on drugs or you have the IQ of a green mango. Prices are now in total free fall, with buyers and competing builders in complete control. The latter is more of the driving force in prices than buyers are now

http://www.treasure-coast.us/weeklyupdate09-23-

oh and then there are the banks who do not wish to be proud home owners dumping their foreclosure stock into the mix.

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LOL.

How naive some folks are!

Watch supply soar as speculative demand fades, and those who bought put their places

up for sale.

The UK is far from immune, it is just a year or so behind the US cycle

http://icwales.icnetwork.co.uk/0100news/02...-name_page.html

THEY are the empty properties that everybody wants – but few young professionals can afford.

With a range of studio and luxury apartments springing up across Cardiff, now has never been a better time for inner city living.

Yet, hundreds of posh flats worth millions of pounds are lying empty in Cardiff Bay because property investors can’t make the quick profits they want.

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...relax ...I'm an 'neither' as saw all this in the 88-95 crash....in early '88 I advised all to get rid of their mortgages ...I did ....those who did not said in '91 ...'how did you know?' ....today is not a good time to have a big mortgage....I have my '88 feeling.... ;) ....never had a mortgage since '88... ;)

I was in a bit of a provocative mood last night, I find post from neither such as yourself (always read your posts unlike some!) vital for this board and bulls play their part when they are feeling constructive. :rolleyes:

Good call about your mortgage, it is certainly a policy of mine to only use a mortgage to my advantage. This time round we bought within our means and viewed low interest rates as a chance to significantly over pay our mortgage. Had we bought a bigger place we would have accrued more "equity" but would have been unlikely to have made much inroads into the mortgage. Glad we are in the position we are in now rather than being stretched in a bigger house with a large lump of “equity”.

Final point, out of interest how close our you to becoming a bear given you called the last crash in advance?

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I don't understand this. Homebuilders happily making good profits. House prices triple. Builders pocket the money. House prices drop 50%. Why wouldn't builders just keep building and making more profits than they were when they started?

Actually most will.

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it's all about land options rather than landbanks.

For a large builder it can turn nasty quicker because of the volume of stock (unsold property ) held at that particular time.

For smaller and medium size builders now buy or agree options on land, if the land goes up in between initial negotiation and contract date the value will appreciate particurly if a land agent is in the deal. eqaully if the value goes down at the point of contract then a deal can be renegotiated.

Bigger builders tend o ignore this and buy large tracks of land at effectively a discount .

All though once theyve got land need to build as otherwise they are financing dead money.

Thsi si where barrets and such like can get caught out as if large numbers of pprerties go unsold profits will suffer and the next phases will dry up until existing stock is sold.

equally small builders will be driven to the wall as thier cash flow will rely soley on the last couple of deals.

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Yes, smaller builders tend to use the profits on the last sale to finance the next build- no sale, now new build, no money to pay wages, or loans, bankruptcy soon follows- and it is amazing how fast a few hundred thousand in profits from last year turn into a court order for bankruptcy!!!

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Watch supply soar as speculative demand fades, and those who bought put their places

up for sale.

The UK is far from immune, it is just a year or so behind the US cycle

hahahhahahaaa :lol:

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