Dear Homebuilders,
Keep building!
Faster, faster, faster. More supply! Keep 'em coming! Build millions and millions of unwanted new homes NOW! Get those stucco homes pouring off the conveyor belt, as fast as you can.
Thank you,
HousingPANIC
(HP'ers, get ready for the mother of all firesales as housing supply far exceeds demand. Current homedebtors, got some bad news for ya - the homebuilders of America are out to undercut you. Oh, man, this is going to end badly...)
January 20, 2007
A HousingPANIC message to the homebuilders of America
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26 comments:
You're right KEIF, the entire industry should shut down. The tens of millions of people in the housing business should all be thrown out of work.
My Thoughts exactly. Some are praising this as good news.
The only thing it is going to do is add to the already increasing inventory of homes.
Yes, they are only designed to build & their product pipeline just cannot be shut off. They are no different than car makers, if demand drops there is a lag to getting production rightsized to demand. An inertia exists in production that causes this lag. How does one compensate for excess supply due to the inertia in production? Just like car makers, discounts, rebates, free options, low APR financing etc. Its strange to see such incentives put on homes, treating them more like personal property and not real property but that's what the industry has come to. Who takes the hit? Individual homeowners, regardless if they are selling or not because everybody's values are undermined. Its just that current competing individual sellers how feel it the most immediately.
On the upside it will make homeownership more affordable for new buyers.
It's bad news for the FB's and speculators hoping to flip homes. They will now be flopped. This is great for me personally, as I'll be in the market to buy a house in the next few years.
LU-CY!!!
New Homedebtors and the Homebuilders that are now undercutting them are going to rumble
Here's a gig I use to amuse myself.
Imagine each of the "missed the boat" sellers being Doctor Evil in the Austin Powers movies.
With pinky to lower lip, they declare, "I want 100 Billllionn dollars!" At first the buyers are stunned frozen, and then HAHAHAHAHA!!!
Yeah, gets me through the day. :)
***** GUY WHO RUNS REMAX REALESTATE JUST BLEW $1MILLION ON A USED HUMMER AT BARRETT JACKSON AUTO AUCTION
The HB's with the deeper pockets and longer lines of credit will destroy the floppers. Good riddance, vermin. This will be great for anyone who wasn't suckered into an overpriced home the past few years. Most everyone else will benefit from the greater supply and lower prices. The FB's and their lenders will eat man-mud.
I think the term home builders needs to be changed to "Home Assemblers"........The shit I am seeing put up shows me almost no one knows how to build a F*ckin' thing anymore. Nor do the inspectors have a clue so the death debt holder is just screwed from the get go even if the prices were realistic, the piece of shit home they bought won't last. The homes built here are as crappy as the cars built here and just as over priced.
Bill
Just understand Accounting 101...
Many posts are indirectly getting at the key issue here with entries like:
"it is better to build the house, since you've essentially incurred the expenses to build it"
Homebuilders are manufacturers. They spend resources to manufacture housing. The costs they incur are put on the balance sheet as inventory until they sell it. That means none of their costs related to building inventory hit the income statement. If they build less units, then each unit has to carry more fixed overhead costs. If the final cost exceeds market value, the company must immediately expense some of those costs as current expense to adjust the inventory to market value. Hence, it is in their best interest to produce at the levels their infrastructure has been ramped to build.
As mentioned in some posts, this is the model of the auto manufactures. There is too much capacity, but no individual auto manufacture is going to build less units and raise their cost per unit. It comes out in the wash (the accounting wash) with gross margins. How much higher is the selling price than the Cost of Goods Sold.
Homebuilders' Management knows if they keep building, their short term income statements stay healthy. Meanwhile the stock options they received in the second quarter when the stocks were trashed, now will pay off handsomely in the next couple of quarters.
Ryland was $36 in July it has now recoverd to $53, a nearly 50% jump; big option money.
Over the next few years you will see the companies go through special accounting restructuring programs to reduce their infrastructure. That becomes a non-recurring expense, meaning Wall Street should dismiss it as a one-time expense. This allows management a few more quarters of cashing in their options.
Having said all this, this overcapacity doesn't trash the housing market; it merely softens it. The crash does not happen until there is a credit crisis, then the housing market is the clearing house for bad debt reduction. That's when it gets ugly; this other stuff with overbuilding is just a long drawn out affair like the autos and airlines. But it is note worthy that they are forced to build more homes than the market needs to keep the option-ATM-machine open.
Recently I've been receiving post cards and ads from local home builders advertising their homes for sale, buy now get a big screen tv, etc. Much the same way you get unsolicited mail from local car dealers.
I've also been receiving alot of phone calls from Countrywide asking to refinance or take out a new loan, etc Countrywide usually calls once or twice a week, but it's been twice a day some days.
I'm not even looking to buy, I've been unloading my properties as fast as I can with every sort of deal I can make, licit or illicit. (sold/dumped, 12 homes on the local market in last 6 months, most of the buyers were other mom and pop investors.
Good luck to them, I see it going down from here, who knows.
Tony in WA
Funny how Wall STreet thought the home building number was GOOD news. Could it have been WORSE news for homedebtors and home builders?
Anon said: "***** GUY WHO RUNS REMAX REALESTATE JUST BLEW $1MILLION ON A USED HUMMER AT BARRETT JACKSON AUTO AUCTION"
It probably has bullet proof glass and armor, which costs that kind of money...
The homebuilders are undercutting resale housing but when the foreclosures start hitting the market, the banks will define the term "motivated seller" and undercut everyone.
And then the snowball starts rolling and getting bigger as the real undercutting starts.
How come everyone can't see something so simple?
Motivated Seller Pecking Order, 2008:
1) normal homedebtors
2) flippers still trying to get out
3) new home builders
4) pre-foreclosures
5) bank-owned foreclosed properties
In other words, price they'll take for a $400,000 house:
1) $380,000
2) $350,000
3) $300,000
4) $290,000
5) $250,000
Get it?
yes, KEEP building!!! hahahahah
On the upside it will make homeownership more affordable for new buyers.
Saturday, January 20, 2007 11:44:54 PM
YAAAAAAAAAAAAAAA!!!!!!
jrinlv said...
An astute writer for the Financial Sense University web site predicts that by the end of 2007 there will be between 13.5 and 14 MILLION vacant houses in this country. Is that an amazing number? Anyone doubt that prediction after seeing the builders continuing to build the cookie-cutter POS houses without the demand?
Sunday, January 21, 2007 1:53:52 AM
It'll be called Sction 8!!!!
A ghetto family in your development very soon. Get ready. In Chicago, they call it "Mixed Income". HAHAHA
I've been looking at REOs and it seems the banks are still in dreamland. They are pricing their homes higher than the homedebtors.
I work for an excavating and grading company in So.Cal., Other than finishing up small jobs, we have None to go to, Nothing scheduled! Only partial crews working!
First time since '81 !
Other than surrveyors, we are the first in....The housing bust trickle down begins!
A flipper in Ohio? They might as well try flipping in North Dakota. Then again, those morons from California were scooping up barren desert in south Texas to flip.
California Morons = the best public education you can overpay for - talk about a bubble!
Builders turn a profit in the slow times. The way they do it, they buy cheap land and lots of it, then they build cheap houses which dont have any of the hand made feel to it and they negotiate the living daylights out of their suppliers so those guys aren't over charging them etc etc ... In up cycles they over pay for everything and in the frenzy of buying and competing ... it seems to be "Higher the better".
Of course the inventory they have now, they'd slash and burn, and just when its about all sold, they'd re enter in a different neighborhood at a lot lower price. been there, seen it, ignored it and walked away from it.
Cool.
Cow_tipping.
Amen Brother! Root for and cheer those builders on! In the moronic words of W "Bring 'em on!"
More and more unwanted capacity from building and foreclosures coupled with tightening credit will kill the bubble faster and faster, like a snowball gaining momentum off of a moutainside. Keep on throwing them up! Just remember bubble sitters, don't buy any piece of crap built from about 2005 or newer because the quality and matericals are not going to be there - just a big vinyl sided dog turd waiting for some sucker to move in.
Do you think you will buy your new dream house and live happily ever after? Think again.
Bill, Sh*t is correct. I know, I own it. Did not even know the garbage some of these companies put up existed until I ended up in one.
Why not go to www.hobb.org and look at how production homes are being built. This is not my dream home, it is the nightmare of my life.
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