Wednesday, June 4, 2008

Builders' Woes

"Highlighting their desperation to sell homes, builders are bringing back the gimmicks--mortgage rates that start low, help with down payments, zero out-of-pocket expenses--that helped fuel the housing bubble before it went bust. ... Builders, trying to survive the worst downturn since the Depression, must move inventory quickly to bring in cash: Stung by eroding land and house values that show no sign of stabilizing, the nation's top builders have racked up more than $24 billion in impairment charges, according to [S&P's]. ... Most industry watchers aren't worried. To them, this is simply the latest batch of incentives--this round inspired by the heightened lending restrictions--necessary for business, even if they stress already-razor-thin margins", WSJ, 23 May 2008.

The builders didn't see the end of the real estate cycle any better than anyone else. They won't see the upturn when it comes either.

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