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EScroogeJr (< 20)

builders get breaks from congress

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April 03, 2008 – Comments (2)

 "WASHINGTON (AP) -- Homebuilders and the mortgage industry are emerging as big victors in a bipartisan agreement reached by Senate leaders on legislation designed to limit the housing crisis. The $15 billion measure, announced Wednesday by Majority Leader Harry Reid, D-Nev., and GOP leader Mitch McConnell of Kentucky, contains a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year timeframe. ADVERTISEMENT That's good news for big homebuilders such as KB Home and Pulte Homes Inc., which have been saddled with massive losses over the past year."

 

This is good news and bad news at the same time. The good thing is that more builders will stay in business, so hopefully a few more houses will be built. The bad news is that distressed land sales are over, so there will be no chance to grab cheap land to build a cheap house on it. Biggest winners: floridabuilder's Tier 2 sells. Biggest losers: greedy builders like MDC who sat on their a..s during the downturn because they wanted to pay less than 30 cents on the dollar and will now have to pay the whole dollar because sellers are no longer distressed. Yet another victim: floridabuilder. No more cheap land for his real dollars and no more virtual dollars from shorting builders in Caps.

2 Comments – Post Your Own

#1) On April 03, 2008 at 8:39 AM, devoish (98.76) wrote:

This is good news for floridabuilders real dollars as the homebuilders will be able to pass the tax savings on to fbldr, in the form of lower land prices. It is bad news for our shorts because now some builders may wait until 2009 to mark to reality. 

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#2) On April 03, 2008 at 10:53 PM, dexion10 (28.26) wrote:

Escrooge - you're right about NOT shorting builders (in april) we'll see if they can't be shorted again in 2008.

For now though that legislation is a big deal as is all the housing related legislation working it's way through congress.

What is funny is that these idiots in congress are going to stretch the economic slow down out by not allowing affordable housing to make a come back.

When consumers overpay for their homes they have less money to put into the economy because they are saddled with big mortgage payments.  

The one good thing about forclosures and home price declines is that it will increase consumption.

 Of course that's a small consolation vs. the tremendous leveraged wealth destruction that home price declines bring with them and the fact that home price declines affect every bank and therefore the integrity of the entire financial system....

What does this ultimately mean - the biggest losers from the housing cycle bailout or no bailout will be RETAILERS.

Either way the consumer is screwed... either they're home prices are going down OR  housing won't become affordable. 

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