From the Editor of BIG BUILDER Magazine

What you can see

The situation:
Housing de-coupled from at least three fundamental drivers of housing -- household growth, job and income growth, and earnings growth. Home prices detached from rent prices and left affordability ratios in their dust. Land prices untethered from historical lot-demand rates. Easy money's phantom wherewithal split consumerdom from consumers' realistic means to repay their debts. Commodity energy prices fell well out of the gravitational field of real demand levels. Collateralized debt obligations and structured investment vehicles unhinged from their respective cash generation fundamental. Globally, emerging market demand split from domestic languor in many manufacturing, tech, and services sectors and gave companies record performance even as the U.S. economy slowed. In a world of connectedness, many economic "drivers" have disconnected dramatically from the marketplace activity they're supposed to drive.
The analysis:
Visibility is in limbo; managing and leading amid clouds of uncertainty are a big builder's sole going-business option. A scary half-million starts level and a 15-20% national average home price decline may seem to be be worst-case scenarios for the next 12 months, but an even more daunting possibility that home building's leaders must somehow imagine and avert is below-normalized demand for a sustained period of time...

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jmcmanus@hanleywood.com

M/I Sells Land in Three States

In a flurry of year-end land deals, Columbus, Ohio-based M/I Homes sold off 3,700 lots, primarily in Florida, and announced its exit from the West Palm Beach market.The sales total $82 million, and the company expects to record pre-tax land impairment charges of about $80 million in the fourth quarter of 2007. However, by closing the deals on December 27, M/I expects to benefit from a tax refund of nearly $50 million in the second quarter of 2008. (BB News)

Complete article

Orleans Sheds 1,400 Lots in 5 States

Orleans Homebuilders in Bensalem, Pa., started off the New Year with a much lighter portfolio. Through a series of sales, the builder cut its lot position by approximately 18% from Sept. 30, 2007, and its total owned and controlled lot position by approximately 10% during the same time period. Orleans pared inventory by closing nine deals (with nine different buyers) and selling 1,400 lots within five states prior to the Dec. 31 taxation year end. It also executed option agreements on approximately 350 lots in two communities in different states, for a net decrease in its owned and controlled lot count of approximately 1,050 lots. (BB News)

Complete article

Cash by Design

A design studio strategy—executed well—can play a make-or-break, cash-generating role in ensuring your company’s survival over the next 24 months. You can leverage your design studio program both as a tool to sell homes and to increase profitable revenue on a per-home basis. Still, for many home builders who’ve already invested in a design center program, the opportunity remains uncaptured. Take this brief five-question survey to help us benchmark practices that will lead to new, exclusive insight into operational design center improvements you can make right now. (BB News)

Click here to take survey

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TOUSA Faces Interest Deadline

Pressure mounted January 2 on Technical Olympic USA's management team to make some major moves to restructure the business or face insolvency, according to an 8K filing with the Securities and Exchange Commission. As of January 1, the company had not made its semi-annual interest payments on two sets of notes. Although the principal on $300 million in senior notes and $185 million in senior subordinated notes aren't due until 2010 and 2012, respectively, if the company fails to make the interest payments within 30 days of the due date, it could face immediate repayment of those debts. (BB News)

Complete article

Markets Rebound on Economic Data

The stock markets greeted 2008 with a broad-based sell-off Wednesday on bad news on manufacturing and oil prices, but all three of the major indices regained about half of Wednesday losses in midday trading Thursday after the Commerce Department reported that November factory orders rose by 1.5% and the Labor Department said its weekly tally of jobless claims fell 21,000 last week, about four times more than the street was expecting. (BB News)

Complete article

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