Homebuilder Trends: What To Do About Inventory? [Housing Tracker]

by: SA Editor Judy Weil October 08, 2008    
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Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Spec In Check. “Zelman & Associates' CEO Ivy Zelman: As builders are burdened with significant carry costs associated with finished spec inventory [including 166,000 spec completions currently], there are few options other than selling the home for a loss to generate cash in this weak environment. For private builders with project-specific financing, this could require the builder to cover the difference between the home selling price and the balance remaining on the debt. Specs on average remain unsold for 9-plus months, the most time on the market in 40 years, and almost double their normal time as a ready-to-occupy home. Public builders can take impairments and still come up either flat or even cash-flow positive.” (Big Builder Online, Oct. 6)

Homebuilder Hammered By Land Deal. “A local development company has bought a stalled 100-acre subdivision in North Natomas at a deeply discounted price… The project had been slated as Pardee Homes’ debut in the Sacramento market. Terms weren’t disclosed but several real estate sources said privately held Granite Bay Development Co. paid about $25 million — or 20 cents on the dollar after factoring in the millions of dollars Pardee pumped in for streets and utilities. The deal for Natomas Meadows is one of the few significant land transactions during the slump as sellers and bargain hunters remain largely at odds about the value of residential land.” (Sacramento Business Journal, Oct. 3)

Construction Costs Make Condos Money Losers. California: “Residential markets across the country have been hit by the current mortgage and credit crises, but the East Bay has been especially susceptible to plummeting sales and property values. The other part of the equation is construction costs, which haven’t slid as significantly as home prices. DataQuick Information Systems: Average home prices in Alameda County fell 29% last year to $440,000 in August, compared with $619,000 the previous year… Many contractors have lowered their prices, but the cost of materials is steady thanks to global demand.” (East Bay Business Times, Oct. 3)

Energy Efficiency Ordinance Softened. “The city of Austin has backed away from an aggressive — and highly controversial — proposal to require energy efficiency upgrades on most single-family and commercial properties at the point of sale. Earlier this year, a city-appointed task force considered creating new laws that would mandate features like adequate duct sealing, insulation and weather stripping as conditions for selling or renting homes or buildings. Realtors balked, saying such requirements would dramatically increase the cost and time to sell property.” (Austin Business Journal, Oct. 3)

                                             
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This article has 2 comments:

  •  
    Oct 08 08:54 AM
    Mandating energy efficient building is a sign that our government can look to long term ways to deal with our energy crisis. It's sad that our housing and financial crisis are ruining any hint that our government can plan, rather than run around putting out fires.
    Reply | Link to Comment
  •  
    Oct 08 01:40 PM
    What to do with some of the inventory?

    Pass out nail pullers. Some of those newly built communities on the fringe of suburbia have no chance of being filled even in the intermediate time frame.

    So take them apart and ship them off to China. They will create short term jobs. Remove inventory and supply the demand in Asia.
    Reply | Link to Comment
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