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Standard Pacific Corp. Message Board

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  • rajoilprasad rajoilprasad Aug 25, 2007 10:58 AM Flag

    Its different this time

    The main reason from housing not being affordable was land cost which went too high. Building cost have gone increased normally in line with inlation. Land cost are coming down and will become affordable in a few more quarter.


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    • "Land cost are coming down and will become affordable in a few more quarter."

      You really think there are a few quarters of impairments to come? If so what will be left of SPF?

      • 2 Replies to rogerc39
      • After talking to a friend of mine who builds in Southwest Florida, in certain areas, new houses are selling below construction costs to move inventory. That means the dirt is being valued at zero. (From an economic standpoint, you would have to pay a builder to build on a free lot before he could make a profit-strange isn't it?-not a good situation if you own a bunch of land)

        Many areas in the rust belt have faced the issue for years due the the evaoporation of manufacturing facilities. Such pricing was unheard of in Florida. Now it is becoming more and more common to see builders slash prices to move inventory.

        The funny thing is that those executives that brag that building houses is one way to harvest cash out of land, when saturation reaches the point that houses are selling below construction cost, even though land cost may represent as much as 50% of the purchase price, construction expenses may account for the other 110%. (Notice that many of those executives who talk about harvesting cash of land by building houses rarely discuss construciton costs)

        One way to reduce the current oversupply of housing in saturated areas is to slow construction. The problem is that production builders must keep building to cover SGA and interest expenses.

        Why do you think SPF is publicly saying its goal is to reduce spec inventory while in reality spec inventory increased from last quarter to this quarter?

        Once pricing is driven down to below construction cost.................. Houston we have a problem.

      • 2nd quarter impairment was for $852 MM$ which translates to $2.68/share before taxes. 4 more quarters of impairment will amount to $10.72/share. Book Value around $22/share they will still have over $10.00/share of book value left.