Homebuilders Liquidate Assets in Desperation Sales

[Bloomberg]

Homebuilders Liquidate Assets in Desperation Sales (Update1)

By Bob Ivry

Oct. 5 (Bloomberg) -- When D.R. Horton Inc., the second- biggest U.S. homebuilder, couldn't sell the one-bedroom condominium in San Diego it listed for $349,800, the property was auctioned as a last resort for 37 percent less.

D.R. Horton, with annual revenue of about $11 billion, and Hovnanian Enterprises Inc. now face the worst choice in the worst residential real estate slump since the 1930s. They're selling homes at any price they can get.

``It's desperation time and some companies may not make it,'' said Alex Barron, an industry analyst at Agency Trading Group Inc. in Wayzata, Minnesota. ``At this point in the housing cycle, if you have too much debt, it's hard to get out from under it.''

Homebuilder profits depend on the cost of land, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. Companies can still make money building on land purchased before the 2005 peak of the five-year U.S. housing boom, though price declines of as little as 10 percent might wipe out those profits, he said.

``They are all losing money,'' Burns said. ``They'll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn't make their costs.''

`Really Stinks'

The average cost to build a 3,340-square-foot home in the U.S. is $403,925, according to the National Association of Home Builders in Washington. That includes $219,015 for construction costs, $45,507 for the price of undeveloped land, $65,969 to prepare the land for building, marketing expenses of $11,258 and a sales commission of $19,499.

During Hovnanian's ``Deal of the Century'' promotion last month, the company sold a 2,900-square foot five-bedroom, three- bathroom house at the Greenwood Manor development in Royal Palm Beach, Florida, for $525,000, said Kathy Bell, who bought a house with the same floor plan down the street for $575,000 in March 2006.

``It really stinks,'' said Bell, 50, a medical billing specialist. ``We were here in the beginning and we didn't get any deals. It's very upsetting.''
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http://www.bloomberg.com/apps/news?pid=20601103&sid=adFsGVxspArw&refer=news

[FL]

you can hear and read tons of such kind of news every day from wsj, cnn money, bloomberg and other financial media or main street media. but i am curious if anybody in this area have actually benefitted from such desperation sales. on the other side of Rt-130, the builder fo Stratford development even raised price this year.

[Guest]