Probably correct. However, I keep one of these

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Just so any robbers will know, I don't have any cash at all in my house. But I have one of those weapons, too.

And a big dog who knows how to use it.

I wonder if the steep rise in long rates over the past few weeks is actually making the situation in housing worse. It seems like ARMs have a bad name now and people want to switch to fixed rate conforming loans.

In any case, I think the past few weeks have been an embarassment to the Fed. With the mortgage rates people pay attention to actually rising significantly, some people must be thinking the Bernanke Fed has their first serious mistake.

I know I am.

word on the street is that beazer is going under for real this time.

i'm getting unsolicited applications from what must be half their entire virginia staff

i have ONE, count em ONE unit left in my residential pipeline.

joy to the world

And while you were waiting.... Beazer Homes is going to restate financial results back to 2004 due to accounting errors discovered during an internal investigation that also found violations of federal housing regulations. Yet, this will leverage a positive outlook spin, yes....

Homebuilder obituaries are pretty obvious.

The more important question is...which banks and bondholders are holding the biggest bags?

yeah, did u see the market makers try to save Beazer today by pumping the stock on the bad news? same with Pulte. i'm not lettin my Beazer shares go until they go to zero. i also shorted the heck out of some more Pulte today. since today was the save, tomorrow will be the kill.

also check this out. with these types of shenanigans goin on in the stock mkt, theres no way we're going Weimar. the trust is gone:

U.S. Investors Face An Age of Murky Pricing - WSJ.com

Having just watched the film "The Producers" again on the teevee, I was struck by the thought that maybe a slightly less than scrupulous builder could turn a profit on abandoned deposits?

One of the shadiest parts of the financial market is a thing called PIPEs -- private investment in public equity. Beazer went into the PIPEs market a year ago to borrow over $100 million.

"On June 15, 2006, we completed a private placement of $103.1 million of unsecured junior subordinated notes which mature on July 30, 2036 and are redeemable at par on or after July 30, 2011 and pay a fixed rate of 7.987% for the first ten years ending July 30, 2016. Thereafter, the securities have a floating interest rate equal to three-month LIBOR plus 2.45% per annum, resetting quarterly. These notes were issued to Beazer Capital Trust I, which simultaneously issued, in a private transaction, trust preferred securities and common securities with an aggregate value of $103.1 million to fund its purchase of these notes. The transaction is treated as debt in accordance with GAAP. The obligations relating to these notes and the related securities are subordinated to the Revolving Credit Facility and the Senior Notes."

So, they set up a conduit trust to buy the notes and then issued trust securities to the ultimate investor. But the only reason an investor would loan a struggling company 10-year fixed money for a junior subordinated loan at 7.987% is some kicker. In this case, it's not disclosed. Usually, its common or warrants.

You might think the investors who bought this PIPE are screwed. But not always so. That's what's sleezy. The investors often short the common stock. Even if the company goes broke, if the bonds lose less than the stock, they win.

It's the slimy underbelly of small company, high-credit risk investing, and the common shareholder almost always gets screwed.

Nice artice idoc. Talk about the enronification of the financial system:
Some financial firms have sought in recent weeks to avoid write-downs by selling mortgage positions to hedge funds, with an agreement that allows the hedge fund to sell them back after a set period. A hedge-fund trader says his firm recently bought $1 billion of risky subprime mortgage loans from Bear Stearns with a one-year pact, known as a "mandatory auction call," under which Bear agrees to participate in an auction for the loans that will provide the hedge fund with a minimum rate of return, according to a person familiar with the situation. "They didn't want the mortgages on their books," the hedge-fund manager says.

Oh wait, that must be that fabled flexibility Greenspan was always talking about.

Well if they got a high enough ratio of people cancelling to the number of houses built it'd be OK. 10 people put down 10K and cancel on the same shell and you probably covered the cost of materials. Somehow I bet the ratio of deposits to houses isn't that favorable. Plus after a while it'd seem to be difficult to come up with more sheep to fleece.

We need to get a calculation of "net sales" (new contracts - cancellations). Are cancellations now higher than sales?

I also wonder whether the builders will hold on to deposits. Are there outs on the contracts in case "I don't sell my current house, in case my mortgage application is not approved or an approval is withdrawn.

Finally, the builders have been mixed lately, with XHB (index also including HD, LOW, manufactured homes, furniture etc)moving up. This new information from BZH seems like it could be enough to cause a sell off.

C_S

Yes, I bought some XHB Nov 24 puts earlier this week. I expect/hope to see another down leg, although I don't expect XHB to fall too far. I'd like to see XHB fall to 21 or 22--if XHB falls, I'll sell Nov 20 puts against my 24's.