Meanwhile the homebuilders keep building, because they can't sell the land.

More accurately they need the cash to service debt & cover overhead & they can't sell the land as an option to get cash...

Their only hope is to continue to build & pray they can sell the resultant product for enough to cover variable cost, immediate debt service & overhead. Good luck.

My guess is if a few of the monkeys had hoarded cash about a year ago (scaled back, no stock buy backs, no dividends, no bonuses)... they'd have enough cash in hand now to weather the storm WITHOUT building like crazy... 'hunker down' and watch all their competition fail around them... Then take ALL the market share later after the eventual rebound.

One of my prof's in my masters program said 'you know a boom has gone on too long when none of the market participants know how to play defense anymore'. We been there. They are going to learn all about defense now, the hard way.

might as well laugh a little bit.

http://www.informationclearinghouse.info/article14837.htm

CR & rcyran - I agree with you both... builders can't win (Nash equilibrium) & managers at the publicly traded HBs especially can't win... if they proposed a strategy that wins for their firm in 'the long run'... i.e. hunker down... they get fired for negativity in the short run.

What a clusterf***.

CR,

I think the builders are in an unfortunate Nash equilibrium. They can't gain by changing their own behavior (at least as rewarded by Wall Street), but in the aggregate (all builders) their behavior is obviously self destructive. Only private builders can really "hunker down" and wait out the carnage.

I think this goes well beyond housing and into our economy in general. I've often thought of the "prisoner's dilemma" (a form of Nash equilibrium) when thinking of outsourcing.

It is clearly in the interest of any ONE particular company to outsource all of its work to cheaper labor in other countries.

It may not be in the interest of ALL companies to outsource all of their work to cheaper labor in other countries.

Taken to its extreme, I often wonder what would happen if ALL labor could be automated. Companies wouldn't need ANY workers. That would sure put a damper on job creation and the ability to buy the goods the companies create.

Outsourcing might actually be worse than my extreme automation example though. You pour money into an automation machine and it is gone. You pour money into an outsourcing machine and it tends to build up massive reserve currency hoards to be spent later. In theory, that's deflationary short-term and inflationary long-term. One wonders how much deflationary short-term is left. Well, assuming my theory is reality and that we should be concerned when we look at the trade deficit.

Hey, just my 2 cents.

This comment about the McMansion glut in Elmhurst, IL (which I wasn't able to get onto the earlier thread until it became dormant) is relevant here.

In game theory, the prisoner's dilemma (sometimes abbreviated PD) is a type of non-zero-sum game in which two players can "cooperate" with or "defect" (i.e. betray) the other player. In this game, as in all game theory, the only concern of each individual player ("prisoner") is maximizing his/her own payoff, without any concern for the other player's payoff. In the classic form of this game, cooperating is strictly dominated by defecting, so that the only possible equilibrium for the game is for all players to defect. In simpler terms, no matter what the other player does, one player will always gain a greater payoff by playing defect. Since in any situation playing defect is more beneficial than cooperating, all rational players will play defect.

The unique equilibrium for this game is a Pareto-suboptimal solution—that is, rational choice leads the two players to both play defect even though each player's individual reward would be greater if they both played cooperate. In equilibrium, each prisoner chooses to defect even though both would be better off by cooperating, hence the dilemma.

http://en.wikipedia.org/wiki/Prisoner's_dilemma

What Are China Stocks Worth? Singapore Predicts 65 Percent Less

Considering the run up they've had over the last two years, even 65% less than now is one helluva gain.

gotta burn that liquidity somehow.

CR, I just heard near-ocean condos in process at the "Bluffs" in Carlsbad dropped prices on one model from $675k to $600k. If this is true resales will HAVE to do the same or more.

Nearly 20 percent of Sacramento homes are worth less than the value of their mortgage.

Facing Foreclosure Fears

Still, Metoyer figures he saved about $50,000 from what similar units have sold for recently. And although he expects the market to remain soft for a while, "I don't see a bubble bursting here. It's either going to hold steady or go back up again. So either way, I win."

Looks like somebody is getting his research from Bear Sterns.

News flash from the Emerald Isle: Fed Governor Pianalto "sees little consumer hit from housing." I guess the "little consumers" she's talking about are leprachauns. Hmmm . . . and I always though they lived under toadstools.

Business & Financial News, Breaking US & International News | Reuters.com

I have my doubts Manhattan real estate will hold up so well when the 5 years of supply currently under construction fully hits the market. You can't swing a dead cat without hitting a new condo development in my neighborhood.

I get the feeling that all the construction going on below Houston St. and everything going up in Williamsburg/Greenpoint will suppress prices for a loooong time.