fumbling_IHB
New member
<p>There's an interesting commentary I read off the Internet today:</p>
<p>As others have noted on these pages, a fire sale held by a homebuilder sets the new level of pricing in a neighborhood and its surroundings. Of course, foreclosures sales do the same. However, these fire sales are a new event which means the impairments taken thus far at the homebuilders are based on pre-fire sale, pre rampant foreclosure pricing. </p>
<p>I suspect these impairments, while including some price and margin slippage, were based mostly on a slower rate of sales. Such impairments may incorporate a greater cost of carry rather than a meaningful decline in price. As prices decline I suspect homebuilders will, in the fullness of time, deliver a new wave of impairments that will make the first wave of impairments look small. </p>
<p>I don't know the exact timing and it could take well into next year, however, the point is that book value, a key variable for this group, will be a downwardly moving number for a long time. </p>
<p>Every time this group bounces, I believe it remains ripe to short back to the old lows. Down near the lows I usually watch to see if any names in the group are breaking to new lows and if so, I often stay short and might press them a bit. </p>
<p>As others have noted on these pages, a fire sale held by a homebuilder sets the new level of pricing in a neighborhood and its surroundings. Of course, foreclosures sales do the same. However, these fire sales are a new event which means the impairments taken thus far at the homebuilders are based on pre-fire sale, pre rampant foreclosure pricing. </p>
<p>I suspect these impairments, while including some price and margin slippage, were based mostly on a slower rate of sales. Such impairments may incorporate a greater cost of carry rather than a meaningful decline in price. As prices decline I suspect homebuilders will, in the fullness of time, deliver a new wave of impairments that will make the first wave of impairments look small. </p>
<p>I don't know the exact timing and it could take well into next year, however, the point is that book value, a key variable for this group, will be a downwardly moving number for a long time. </p>
<p>Every time this group bounces, I believe it remains ripe to short back to the old lows. Down near the lows I usually watch to see if any names in the group are breaking to new lows and if so, I often stay short and might press them a bit. </p>
