Home Builders Looking to Bail-in after the Bail-out

“As market conditions continue to soften, even the builders who have already filed bankruptcy are licking their chops - anticipating what will certainly become the land buying opportunity of this generation. In preparation, they’re lining up new equity partners and waiting for the banks to sell assets. But, for a variety of reasons, the banks have been able to avoid declaring a lot of construction loans delinquent, presenting an ongoing frustration for the opportunity funds.”—John Burns Real Estate Consulting

In a recent post, I wrote that I am not going to claim that I fully understand the pros and cons of the $700 Rescue/Bailout Plan. Likewise, I am also not going to claim that I fully understand the workings of the building industry. But I find this John Burn’s statement disturbing. A statement like this is an example of why so many are outraged by the bailout or, if you prefer, rescue plan. The big guys can just declare bankruptcy and then jump back on the money wheel without much trouble. The lowly homeowner takes more of a hit. However, since the lowly and not-so-lowly homeowners are not necessarily blameless in this situation, even that is an over simplification. Greed was present at all levels. Although individual exceptions may exist, all groups that participated in this financial Ponzi scheme carry some of the blame.

Note: Warren Buffet, as shown by an appearance on Charlie Rose, is on the pro side of what some would call the $700 Billion “Rescue” Plan. Economist Chris Thornberg  of Beacon Economics and a frequent guest on AirTalk is on the con side of what some would call the $700 Billion “Bailout” Plan.