Homebuilders and the Bubble

[N.B. I have declared the housing bubble over as of Oct 6, 2005]

I can think of three industry factors that each are interesting and together tell a story. First go to http://insidercow.com/ and look up any/all the big builders Toll, KB, Lenar, etc. Their execs are bailing big time. On the plus side as a business not as a stock play they've learned some expensive lessons. Price depreciation and falling demand is not the disaster it used to be. They can cut 10% by accepting lower profits in exchange for continued sales volume. They can cut 10% even 20% by reducing the fluff they build into their homes, ugrades. They can tighten supply these days with far less exposure to sitting on unsold inventory. No quite build to order but a lot closer than in 1990. The builders have also gone vertical meaning they won't get as squeezed by lenders/financiers or undercut by realtors looking for the next sale.

For all the doom and gloom however remember anyone who bought a home for the purpose of living there anytime more than 2 years ago is still going to be looking at handsome short term appreciation even if prices fall 20%. People who didn't buy for the traditional purposes of living there and participating in the community are called "investors/speculators" and have every expectation of the possiblity of losses. "They bought their airplane tickets, they knew what they were getting into, I say let 'em crash."