BK for 75% of Public Home Builders?
Right now foreclosures are at a historical high and climbing.
Home equity is at a historical low and decreasing.
Vacant inventory is at a historical high and climbing.
Home values are continuing to fall around the country while material costs are relatively stable.
Incomes are not staying close to increasing NON housing expenses. Now that jobs are being eliminated, the problem will likely get even worse.
Many experts say we still have a few YEARS of continued pressures.
Todays public homebuilders have the highest absolute levels of debt that they have ever maintained. The fixed costs are the highest ever due to recent expansion. Currently, the liquidation value of many builders' assets are not worth anything close to their liabilities.
We are now in an environment where it is very difficult for a builder to make a dime building homes. As a result, we have entered the liquidation phase. Those builders that can liquidate to cash and land(assets worth more than liabilities) should be able to wait out the storm. Those builders that have more liabilities than assets are likely out of business.....many probably in 2008.
It this point, most builders are simply liquidating assets at huge losses. Builders like MDC and Toll and a few others should be OK in the long run. The rest, we should see a dramatic change in attitude in the next eight weeks.
Its tough to lose money on every sale and make it up on volume. At some point, you run out of money to produce volume.