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So, Raleigh/Durham etc. apart, the US housing market appears to be in horrendous shape.
The share price of all the major builders have plummeted by 50-75% in the past year. Apparently, major reports released this week from the housing sector are anticipated to be very ugly. Just how low can these builders share prices go? I personally doubt that we've seen the bottom of the market in most areas of the US yet and can see share prices plummeting further.
My question is...
..who thinks we'll start seeing major builders going bankrupt? If they do, what happens to half built subdivisions that will still be around? Will they become a patchwork of houses built by whoever buys the lots? What happens, to say, the half built house that I may be having built by XYZ homes?
I can tell you a little something about it! The homes will be sold dirt cheap, and they will lower the value of your home. A lot! And there's not a thing you can do about it.
So, Raleigh/Durham etc. apart, the US housing market appears to be in horrendous shape.
The share price of all the major builders have plummeted by 50-75% in the past year. Apparently, major reports released this week from the housing sector are anticipated to be very ugly. Just how low can these builders share prices go? I personally doubt that we've seen the bottom of the market in most areas of the US yet and can see share prices plummeting further.
My question is...
..who thinks we'll start seeing major builders going bankrupt? If they do, what happens to half built subdivisions that will still be around? Will they become a patchwork of houses built by whoever buys the lots? What happens, to say, the half built house that I may be having built by XYZ homes?
The answer is....it is definitely something to add to the mix regarding uncertainly in this market.
I don't think people realize the pain that residential real estate is going to go through in the forseeable future. The situation will unfortunately get much worse before it gets better..here's some links (horror stories) to try to answer your question...caveat emptor
what happens to half built subdivisions that will still be around? Will they become a patchwork of houses built by whoever buys the lots? What happens, to say, the half built house that I may be having built by XYZ homes?
Here's what happened around my old area back in the late 80's to early 90's. It was in the L.A. and north of L.A., Calif region.
I bought in a tract of homes in Santa Clarita, Calif., where they were auctioning off their unsold houses. Houses had already been sold, but the remaining ones wern't selling. It was a tough market with a big downturn in the defense industry that affected the entire region.
Anyway, the houses were sold at auction, but many empty lots remained. We lived in the house for a while with all the empty lots around us. After about 5 years, the other lots were sold to another developer. This developer built new models and started building the houses on the empty lots.
The problem after 5 years was that the new houses didn't match the neighborhood. The were much smaller, which posed a comp problem for the buyers of the original houses that were sold before the auction. It took them about 10 years to overcome the downturn and consequential development of smaller houses before they were abole to reach breakeven. There was nothing any of the home owners could do about it.
Then, there was another project further north of the L.A. area. A whole bunch of houses in the framing stage were caught in the same downturn. However, the builder did not complete them and put them in auction like the other developer. Instead, they just abandonded them.
These framed houses sat there for years and years and years. Eventually, they served a purpose. One of the film companies used them in one of their movies. They burned them to the ground in one of those spectactular explosion kind of scenes.
The cleared lots were eventually developed once the market rebounded and houses stand on them now. However, they now have their own challanges up in the Palmdale/Lancaster area of far north L.A. County.
So, see what you have to expect about the future. It's not terminal, and maybe you'll get a nice view of a movie production when they blow-up the houses across the street.
We had this happen in Indian Trail NC 2 years ago. When we bought the builder was only about 1/3 done with the subdivision. These were fairly nice homes, well built and appointed and was touted as a top notch high end subdivision. After about 4 months the builder pulled out, sold the front half of the subdivision to another builder who built little cheap ticky tacky houses right next to the nice ones and in a patchwork of lots.
The original builder then sold the back portion of the subdivision and his charlotte division to yet another builder who lowered the quality.
I don't know if the subdivision was ever finished (couponjack might) but we bailed for that and a few other reasons and took it in the shorts big time!
So, Raleigh/Durham etc. apart, the US housing market appears to be in horrendous shape.
The share price of all the major builders have plummeted by 50-75% in the past year. Apparently, major reports released this week from the housing sector are anticipated to be very ugly. Just how low can these builders share prices go? I personally doubt that we've seen the bottom of the market in most areas of the US yet and can see share prices plummeting further.
My question is...
..who thinks we'll start seeing major builders going bankrupt? If they do, what happens to half built subdivisions that will still be around? Will they become a patchwork of houses built by whoever buys the lots? What happens, to say, the half built house that I may be having built by XYZ homes?
Share prices don't necessarily equal bankruptcy. The "big nationals" are doing right now, and over the past 2 - 3 years, what many large corporations do in down times: cut staff, scale back, reorganize, consolidate divisions. Not to say that there might be some big builder bankruptcies in the next year or two if inventories stay at current levels.
As others have mentioned, if a builder decides to pull out of a market or out of a development, they sell or auction off the remaining phases, lots and unfinished homes (although they have to be in really bad shape in that market to walk away from unfinished homes). I have yet to see that happen, but it sounds like it does occasionally.
My advice if you are looking at building in a new development, pick the smallest floorplan, lowest number of upgrades they have available, and landscape the heck out of the home. That way your investment is a bit safer, and the exterior of the home won't stand out as the smallest/least expensive. Also, the local municipalities usually have minimum house size requirements that the builders usually follow (sometimes they build larger than the minimums), so find out what that is and try not to go too much larger than that. That way you'll be a bit safer if/when another builder comes in and builds smaller houses than the original builder.
NEVER, EVER build the largest home in a neighborhood. You will pay greatly in the dariere when you go to sell down the road.
edit: after reading the article on the other thread, maybe we will see quite a few big nationals go bankrupt...
So, Raleigh/Durham etc. apart, the US housing market appears to be in horrendous shape.
The share price of all the major builders have plummeted by 50-75% in the past year. Apparently, major reports released this week from the housing sector are anticipated to be very ugly. Just how low can these builders share prices go? I personally doubt that we've seen the bottom of the market in most areas of the US yet and can see share prices plummeting further.
My question is...
..who thinks we'll start seeing major builders going bankrupt? If they do, what happens to half built subdivisions that will still be around? Will they become a patchwork of houses built by whoever buys the lots? What happens, to say, the half built house that I may be having built by XYZ homes?
This is a reason I would not buy a new home from a small local builder. You have no idea what their financial situation is. For example, a builder here in Atlanta named Levitt and Sons shut down all their housebuilding last week because of lack of cash flow.
Funny you bring this up, because this just happened to me. I bought a brand new home, closed on it a month ago, and now my builder is going bankrupt! (Neumann homes, one of the largest homebuilders in Chicagoland.) My subdivision has a long way to go before it will be completed, we are owed sod by the builder that we will probably never see now, and our 1-year warranty through the builder is now gone. Many people have leins on their homes because the builder didn't pay contractors. Many others had large deposits down and now don't know if they will get their money or their house. So I guess I will just have to wait it out and see what the fate of my half built community will be.
cbs2chicago.com - Major Illinois Home Builder Faces Bankruptcy (http://cbs2chicago.com/local/neumann.homes.bankruptcy.2.411240.html - broken link)
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That way your investment is a bit safer, and the exterior of the home won't stand out as the smallest/least expensive. Also, the local municipalities usually have minimum house size requirements that the builders usually follow (sometimes they build larger than the minimums), so find out what that is and try not to go too much larger than that. That way you'll be a bit safer if/when another builder comes in and builds smaller houses than the original builder. 
(Neumann homes, one of the largest homebuilders in Chicagoland.) My subdivision has a long way to go before it will be completed, we are owed sod by the builder that we will probably never see now, and our 1-year warranty through the builder is now gone. Many people have leins on their homes because the builder didn't pay contractors. Many others had large deposits down and now don't know if they will get their money or their house. So I guess I will just have to wait it out and see what the fate of my half built community will be. 
