I arrived yesterday around lunchtime to what was an unsurprisingly gray and chilly San Francisco day. Despite the drab weather, my afternoon turned out to rather colorful as I got a chance to sit down with a handful of industry insiders to exchange ideas and information. So, here's the down and dirty:

• During lunch with Lisa Marquis Jackson, a former Big Builder editor who now works for the real estate consulting bastion John Burns, we talked about the surprising 17.2% jump in housing starts and debated whether it was a proverbial dead cat bounce or the first indicator of a strengthening trend. While I'd like to believe the latter, my gut says what we're seeing is more the former. Maybe it's the fact that one of my last conversations before I headed out here was with an executive at a Florida home builder; while his company saw a big bump up in traffic and sales in April, he wasn't that enthused with May results.
  
  Although I'd like to believe that we've turned the corner, I think we also have to remember that starts are a lagging not leading housing indicator. So, my suspicion is that the uptick is a result of a combination of both a decent blip in new sales contract in April and big builders starting to bulk up on specs in an attempt to meet what they've ball parked as demand generated by a closing window on the federal $8,000 first-time home buyer tax credit. I also recommend you read both John McManus's take on the latest starts data and Jamie Pirrello's blog on how builders go about calculating how many specs they should build. Both are worth a read.
  
  
• I also heard more about the cracks that have started to form in what had been a frozen land market. According to Steve Cameron of Starwood-backed Foremost Communities, in Southern California, builders are starting to get back in the ring, seriously search for ways to replenish their lot pipelines with cheap finished lots that they can turn fast for cash while they sit on the stuff they hope they'll make money on eventually. In fact, Cameron said for the first time in what's been years, he thinks he may have missed out on a deal that he really wished he would've gotten.
  
  But while he can live with that because it means we're closer to recovery, he believes some of the rules of the road will have changed once the rebound is officially underway. First, he believes financing will be pretty dramatically different for private builders. Public builders may have an average of 50% debt to equity, but Cameron says the average private builder has about 300% debt to equity. That's not going to fly in the new housing economy, he believes. Banks will reduce loan to values and private builders will have two choices: ante up more equity or get smaller. Second, Cameron believes we'll have much more regulation on the mortgage side of the business for better or worse.
  
  The other great takeaway I had from the conversation was I added a new term to my vocabulary: bank orphan. A bank orphan is a company that's been basically left in limbo after its bank (or banks) has been taken over by the FDIC. I just got a kick out of that.
  
  
• I also had an interesting conversation with Brookfield Homes' Adrian Foley over a cocktail about what the industry will look like as we come out of this abyss. We talked a lot about where the opportunities will be and according to him the biggest opportunity as the industry gets itself sorted out will be building smarter communities. This of course means more sustainable communities but also denser and more urban communities.
  
  After having a night to think about the conversations, I really think that's the only way private builders will survive and perhaps even thrive. It's a fact that land deals are getting smaller-I'm hearing about 50 to 80 lot deals rather than 200 lot deals. A lot of that is a phasing issue--builders want to bite off a smaller piece but know they can take another possibly bigger bite later--but I think there could be a whole new business model based off of doing really wonderful 30- 40- or 50-unit communities. The reality is smaller private builders can't compete with big builders' access to capital. They just can't. But on the other hand, big builders can't seem to get it together enough to do these smaller projects in any sort of efficient or scalable way.
  
  I believe private builders, who some argue are better operators when it comes right down to it, have a tremendous opportunity with their nimbleness and agility to take advantage of this type of development. Mark my words--this will be how more people will want to live. That's not to say the suburbs are dead. A certain portion of the population will continue to live outside city cores because they want to or they have to. But a growing segment will want to be closer to hubs of activity, have access to public transport, and live in place that makes them feel good because it's contributing to the overall fabric and longevity of the community at large. Capitalize on that and it's now a competitive advantage.