True or false? Homeownership is one and the same as the American Dream. If the simple statement is true, it's reasonable to expect that two stories will unfold over the next stretch of the downward spell in the market.

One story is that public home builders will continue to leverage their ability to move back prices further and further to sell off their inventory at a cash flow positive level, pile up the cash, pay off their debt, buy land for cheaper prices, and start the whole cycle all over again at pricing, margins, and returns, roughly at 2001 or 2002 levels.

The other story is that none but the halest, wisest, or luckiest of private home building companies will survive the next tightening clench of their bank-loan-reliant financial structures. After all the playful jaw-boning we'd heard during the run-up years as to which business model was the smarter capital base--public or private--this market has and is about to intensify its cathartic blow to one side of the argument.

In a Jamie Pirrello analysis of this predicament [in his upcoming Big Money column in the July 2008 issue of Big Builder], the CFO of Michael Sivage Homes & Communities notes how the difference in capital structure amounts to a dramatic [and unfair] advantage for publicly traded home building companies in a slump.

"Most public builders' land and work-in-process inventories are not secured [by mortgages]. Every time a public builder sells a home, it generates cash even if it's at or below cost. A public builder can generate cash by selling a home below cost as long as the cash received is greater than the cost to construct a home plus any sales and marketing expenses." In contrast, a private home builder needs a profit margin not just to cover overheads and hard costs for construction, but to pay off the acquisition and development loan on the building lots.

For private companies, writing down land values may feel close to the equivalent of posting "going-out-of-business" signs on the front window of a retail store. What many private company executives can only be left to is how to minimize collateral damage to \their own personal financial situations, and that of their private investor partners. Many want to stay in the business of building homes and neighborhoods for people even if they succumb to gravity in today's environment.

To grasp the dilemma, all one needs to do is to look at the picture Crosswinds Communities' president Bernie Glieberman posed for recently for Big Builder, standing at the T of an unfinished sidewalk near the curb outside an unfinished new home, where the grass is growing fast and for-sale signs are sprouting faster than dandelions. Bernie took on responsibility for his own home building company when his father died when Bernie was 17 years of age. He--and many of his like running home building operations around the nation--is a quintessential battler.

And what if the leading statement is not quite true? What if the American Dream is not homeownership itself, let alone a specific home, but what homeownership or a particular home says about oneself as a consumer? "I want this life and this lifestyle" is more the profound economic driver in our society than "I want this particular home."

If this is true, it changes the plot altogether. Burning through the inventory, then, becomes only part of the solution home builders must develop to catalyze demand.

Certainly, scarcity will help, but what big builders really need to do is to develop products and secure lots that do not rely so heavily on the push outward from the cores of cities, particularly in search of good schools, security, and privacy. Those values certainly do not diminish, but they change radically in a world of $5, or $6, or $7-a gallon gas, and a constantly elevating premium on time, and all the evolving ways to connect to work, family, friends, members of the tribe, etc.

I think the biggest difference coming out of this downturn into the recovery that will propel surviving big builders to their next heights won't be solely, nor most importantly, economic. It will be that you've learned to develop and build neighborhoods that don't depend on brand new schools, brand new police forces, and brand new infrastructure to reach so far from business, education, and health centers already in place. It'll be reigniting the value of new--but closer in to the downtown core.

Sustainability and technological advances will be your value proposition vs. homebuyers choosing a resale.