Builders selling to speculators fueled the fake numbers. Now builders are competing with the very speculators who bought their homes to see who can dump their inventory (without fire sale pricing) the fastest.
The builders will blink first, racing to the price needed to move the inventory. They can absorb the hit as their profit margin is much higher than Billy the Speculator.
But the builders' stocks are sure in for a ride, and we'll see consolidation now in this arena...
We are now operating in a more difficult market environment," KB Chairman and Chief Executive Bruce Karatz said in a statement. "The country's current-year home sales will likely fall well short of the record rates we have seen in the recent past as the market works through inventory build-ups, including a spike in investor/speculator resale inventory, higher interest rates and higher cancellation rates."
New orders during the quarter fell 19 percent to 9,908 chiefly from more prospective buyers canceling their orders.
"These conditions will likely persist at least through the remainder of 2006," Karatz said.
June 16, 2006
Posted by blogger at 6/16/2006