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alstry (35.03)

Sell More... Lose More

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March 31, 2009 – Comments (4)

From the WSJ: 

Home builder Lennar Corp.'s loss widened in its fiscal first quarter, but it managed to generate more sales than some analysts had expected amid the start of a dismal spring selling season.

For the three months ended Feb. 28, Lennar reported a loss of $155.9 million, or 98 cents a share, compared with a year-ago loss of $88.2 million, or 56 cents a share. Revenue plunged 44% to $593.1 million.

"Despite historically low interest rates and some indicators pointing toward market stabilization, low consumer confidence, increased unemployment and growing foreclosure rates negatively impacted new home sales in most of our markets," Chief Executive Stuart Miller said in a statement.

We are right about there in many communities...especially those where lots of new  homes were built in recent years that are  experiencing very high  foreclosure rates.....the price of a new home is less than stick and  brick cost....

At this point, each home you sell is a money losing proposition....the difficulty with this  business  model is the more you sell the more you lose.....

Who woulda thunk that increasing revenues would be a bad thing....I guess Alstry would because he was telling the blogger that calls himself the builder from the state South of Georgia that this day would come......welcome to Alstrynomics and concentric conctraction......and he used to make fun of Alstry?????

Hang on....we are just beginning....you will like be SHOCKED at just how low prices can go.

4 Comments – Post Your Own

#1) On March 31, 2009 at 2:33 AM, CapStockInvestor (24.39) wrote:

I've read several of your posts.

Now, Alstry. Tell me a solution. A vaccine from the FU virus. How do I protect my self from the FU virus. I would like to know before it's too late.

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#2) On March 31, 2009 at 7:57 AM, nau99 (27.57) wrote:

I found the Lennar numbers extraordinary as well. 

The thing everyone needs to remember about leverage is that once you pop a bubble of credit - unless there's some artificial mechanism put back in place - leverage will ultimately completely deflate.  In the meantime the value of everything - not just houses - continues to decline as there is less and less actual wealth existing. 

With regards to housing - as long as interest rates are kept artificially low... we're likely within a year of the bottom of real estate prices.  That being said... if government bond rates begin to spike, prices could have another severe leg downward.

It's a Brave New World in which we live...

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#3) On March 31, 2009 at 8:29 AM, biotechmgr (36.50) wrote:

sell more, lose more - In the chemical industry we call that taping dollars bills to each barrel.

While everyone enjoys this bear market rally they will forget about deflation...until the next crushing wave hits them and the "surprise" begins anew.

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#4) On March 31, 2009 at 12:42 PM, murugan2 (28.59) wrote:

Until there is a floor created in the housing market, there is no such thing as a bottom to prices.  With more and more foreclosures coming on line every day, there is endless downward pressure on home prices.  I see the newly introduced marketing programs and "incentives" as very reminiscent of 2007 - in other words another HUGE decline in prices is in the offing.  How do you think people who bought houses in 2008, "at the bottom of the market" feel now that they too are 100 grand under water?  They feel like joining the FU club, and adding to the endless spiral of foreclosures leading to depreciating prices leading to foreclosures etc...  With banks unwilling to face reality and deal with people before they get to the point of FU, and with so many unworthy people getting publicly bailed out with your hard earned coins, people actually feel stupid for NOT saying FU.

I know, I'm one of the last people employed in the home building business in Las Vegas.  (think Will Smith in "I am Legend") I spend all day studying lists of foreclosures.  The lists get more impressive every day.  The most striking thing that I see is that the amounts that people are walking away from are getting smaller and smaller every day.  In other words, people's hope for the market recovering even modestly is getting dimmer all the time.

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