how low can 4S ranch new homes go?

[paranoid]

for a typical new house in 4s ranch, what do you think is the cost basis? When will developper stop building because they cannot make money anymore?

For a 3000 sqft house, the land cost for the builder is probably about $300k. Assuming building material cost + labor of $70/sqft, thus $210k in total, this would lead to about $510k cost basis. The developper will not make any money if they sell below $510k.

Pienza/Fielstone is under foreclosure by the bank. Silhouette/John Laining is under severe financial stress and has been laying off people (including 2 senior VPs). Chanteclair/Buie isn’t in a much better condition (rumors say that they are close to be foreclosed if they cannot get sales at current price that has not changed for a year now). the only other developper is Maybeeck/Lyon Williams who just recently lowered its price by about $30k, probably to capture all the potential new buyers there. But for how long can it survive with a price around $600k?

Does this mean that the price have reached bottom? because all 4 of them will die if they have to reduce further the price(?). Basically the situation is like this:
1. they keep the current price –> no sales –> no cash flow –> they die;
2. they reduce the price to catch some sales –> profit margin close to 0 –> they die.
3. they all close down.

what’s your take?

[patientlywaiting]

Land can go go zero (even negative) in bankruptcy and foreclosure.

Some entity will acquire the land at a price low enough to build and sell at a profit. If they cannot, then that same land will be passed on to yet another entity at a lower price.

That’s the power of capitalism. It takes time for the process to play out.

[patientlywaiting]

Land can go go zero (even negative) in bankruptcy and foreclosure.

Some entity will acquire the land at a price low enough to build and sell at a profit. If they cannot, then that same land will be passed on to yet another entity at a lower price.

That’s the power of capitalism. It takes time for the process to play out.

[patientlywaiting]

Land can go go zero (even negative) in bankruptcy and foreclosure.

Some entity will acquire the land at a price low enough to build and sell at a profit. If they cannot, then that same land will be passed on to yet another entity at a lower price.

That’s the power of capitalism. It takes time for the process to play out.

[patientlywaiting]

Land can go go zero (even negative) in bankruptcy and foreclosure.

Some entity will acquire the land at a price low enough to build and sell at a profit. If they cannot, then that same land will be passed on to yet another entity at a lower price.

That’s the power of capitalism. It takes time for the process to play out.

[patientlywaiting]

Land can go go zero (even negative) in bankruptcy and foreclosure.

Some entity will acquire the land at a price low enough to build and sell at a profit. If they cannot, then that same land will be passed on to yet another entity at a lower price.

That’s the power of capitalism. It takes time for the process to play out.

[Eugene]

Who owns the land?

If it’s already owned by the builder, they can keep cutting as long they can sell the house for more than it costs to build. The price they paid for the land is irrelevant.

If it’s owned by a third party, falling market price of new houses translates into falling market price of the land.

[Eugene]

Who owns the land?

If it’s already owned by the builder, they can keep cutting as long they can sell the house for more than it costs to build. The price they paid for the land is irrelevant.

If it’s owned by a third party, falling market price of new houses translates into falling market price of the land.

[Eugene]

Who owns the land?

If it’s already owned by the builder, they can keep cutting as long they can sell the house for more than it costs to build. The price they paid for the land is irrelevant.

If it’s owned by a third party, falling market price of new houses translates into falling market price of the land.

[Eugene]

Who owns the land?

If it’s already owned by the builder, they can keep cutting as long they can sell the house for more than it costs to build. The price they paid for the land is irrelevant.

If it’s owned by a third party, falling market price of new houses translates into falling market price of the land.

[Eugene]

Who owns the land?

If it’s already owned by the builder, they can keep cutting as long they can sell the house for more than it costs to build. The price they paid for the land is irrelevant.

If it’s owned by a third party, falling market price of new houses translates into falling market price of the land.

[Sandiagon]

Generally businesses (Corporations) prefers to go Bankruptcy than absorbing losses. You can expect low prices on foreclosure and REO properties.

[Sandiagon]

Generally businesses (Corporations) prefers to go Bankruptcy than absorbing losses. You can expect low prices on foreclosure and REO properties.

[Sandiagon]

Generally businesses (Corporations) prefers to go Bankruptcy than absorbing losses. You can expect low prices on foreclosure and REO properties.

[Sandiagon]

Generally businesses (Corporations) prefers to go Bankruptcy than absorbing losses. You can expect low prices on foreclosure and REO properties.

[Author]

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