Homebuilders GONE by Summer?
CTX and PHM liquidating land at $0.16 cents on the dollar.
Builders selling specs for $0.50 cents on the dollar.
Most homebuilders are now losing money operating their businesses. That means you are better off to stop building than losing money on every sale.
The joke is that people are going around saying everything is OK for the public builders because they have long term financing. That is dead wrong. Public HBs are not OK, they are in very serious trouble. Why do you think they are liquidating assets so cheap?
Individual's houses have long term financing with their mortgages. Do you think their mortgage lenders would let people sell off their garages, backyards, and kitchens at pennies on the dollar so they could make the monthly mortgage payments and pay Dad and Mom an income?
Do you think its any different with homebuilders right now? Except their mortgages are in the billions. And executive salaries are in the millions....many millions in some cases, and a bunch are demanding bonuses to boot as they loot the lenders and shareholders cash.
Could you imagine someone borrowing a bunch of money knowing he is unlikely to ever pay it back, sticking it in his pocket or transferring it to his wife's name, and then declaring bankruptcy telling his creditors to go fly a kite?
The problem is HBs are running out of inventory fast......and they are getting more and more desperate to liquidate. They are running out of ways to raise cash. The buyers of their assets are paying less and less as more and more builders' bluffs are called. Some builders only have a few months of vertical inventory left. And the land? That is only worth pennies on the dollar based on recent sales evidence.
How much longer do builders have? Those with small mortgages are OK. Those with BIG mortgages have an ever contracting fuse. Many are dropping right now. Many more, including a number of publics will be gone or on life support by summer if current conditions keep moving forward.
Don't let anyone fool you, many people call liquidating assets at huge losses a "going out of business sale".............it's just some want to keep it their secret as they keep drawing big salaries and even bigger bonuses for sacking the company.