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MDC Holdings Inc. Message Board

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  • oldschoolbuilder oldschoolbuilder Apr 20, 2006 10:01 AM Flag

    mdc's downside valuation

    To anyone short--What is the downside here?

    Do you think that with

    1)20% more communities in 2006 vs. 2005
    2)absorption rates already down 30-40% Y/Y
    3)cancellation rates above 30%

    order growth in 2007 will be negative???

    If this were to be the case, then:

    1) cancellation rates would have to remain above 30% (remember, once a buyer cancels he does not order again, so the cancellation rate SHOULD ultimately come down as REAL buyers comprise a greater % of orders and backlog)

    2) Absorption rates would need to come down A LOT further (as there are 20% more communities)

    This does not seem likely to me.

    Is book value and liquidation value irrelevant?

    Serious posts only, please.

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    • <<< cancellation rates would have to remain above 30% >>>

      You miss the whole point.

      As this RE slowdown gains speed, what "orders" will there be to "cancel"?

      Buyers have simply vanished from the marketplace, at least in my area. There is no traffic in the model homes. Title companies are laying off...A major builder I know just closed 1/2 of their models and fired the sales staff.

      Grasp the concept here. There are no orders to cancel.

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