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alstry (36.32)

Homebuilder Shutdowns Accellerating

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August 24, 2008 – Comments (0)

In the northeast, Centex Homes and KB Home have stopped construction at a pair of contiguous tracts immediately west of City in the Hills.

In Arvin, meanwhile, K. Hovnanian Homes has apparently stopped new construction at its Azul and Brisa neighborhoods.

Another national builder with a local presence, Atlanta-headquartered Beazer Homes, formally pulled out of Fresno in June, as well as recently leaving Colorado.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=81068&t=01002130057764754273

We now have a mass of builders shutting down with projects unfinished.  These guys spent millions developing these neighborhoods to begin construction.  You don't piss away millions in investment unless new homes can't be sold for vertical construction cost.

This problem will keep spreading as home prices continue to fall and home prices are falling at a record pace.  With no end to foreclosures in sight, the trend doesn't seem to be slowing anytime soon.  Add in that it is much more difficult to get a loan and it just adds fuel to the fire.

Right now the problem is concentrated in CA and Fl.  It is spreading to AZ and NV and other states.  If oil prices remain high, we may have every public builder in America concentrating their selling efforts in Texas.....what do you think will happen to profiability then?????

The issues facing America today are unprecedented.....banks that have been profitable for over 70 years are now losing money.  What is amazing is how the unfettered extension of credit allowed this bubble to grow so large and persist so long.

With the Dot.Com bubble we were dealing with companies that employed relatively few and had a relatively small impact on the economy.  This go around we are dealing with the core of American industry such as construction, finance, manufacturing, automotive, retail and airlines.

Millions upon millions are being affected.  Many are currently staying afloat simply because they still have access to credit borrowing from one source to pay the other.  Each month, avenues to credit are being cut off as more and more default.

“We also are seeing – and I'm hearing this elsewhere, too – a significant increase in the number of bankruptcies. What's a little concerning is some of these members filing for bankruptcy are not delinquent yet” on their loans with California Coast.

http://www.signonsandiego.com/uniontrib/20080824/news_1b24credit.html

In the end, we are all dependant on others to keep our economy going buying and selling to each other.  When few have the ability to spend, we all lose.  Until we bring debt levels into proportion with incomes, the contraction will continue for as long as the eye can see.

Now the one bright spot in our economy, exports, may be in jeoporday as tensions are rising with the East.  Imagine the consequences of a debt default crisis with an isolationist world economy?

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