[quote=paranoid]gn:
If banks are in denial and not willing to “give away” their lands, particularly with the bailout money from the taxpayers, this transfer of lands from one builder to another at much lower price may not happen for quite some time. doesn’t this mean that the new house price will not go down for quite some time?

Banks with the bailout are much stronger than individuals. It will mean that the next major price reduction will be led by existing home sellers, not by home builders (new homes). [/quote]

This is probably the most accurate statement. I have personal experience on this situation. Last year, in Denver I bought house number 65 out of a planned 400 house development by Centex. Around house number 75 the builder simply stopped operating in Colorado, finished the work in progress and left a warranty office, but no new sales operations. So now a huge amount of vacant land and some vacant lots scattered within the original phase remains. Centex already built very low cost affordable housing, and couldnt make it work. So what other builder is going to come in and buy up that land and try to make money? If that ever happens, it won’t be until housing prices rise significantly and that could be a decade from now or more. The lots themselves were already valued at barely $10K to $15K, so even if they dropped to zero in a foreclosure sale the economics for a builder doesn’t work until prices rise again.

Oh by the way, good bye park, school, playground, and all the other goodies that were talked about in the sales process but never contractually committed to.

So if the builders pull out of 4S, it will likely be a loooong long time before another builder buys up that land, unless it really is a foreclosure fire sale. Possibly the TARP or Bailout du Jour might help the banks to liquidate that land cheap, but I wouldn’t bet on that.