Nov 21 2007 8:23AM | Permalink | Email this | Comments (1) |
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The roll call has begun of home builders who are struggling to make it through the downturn. In recent weeks, two large companies have filed for Chapter 11 bankruptcy protection: Neumann Homes in Chicago, and Levitt and Sons, the 78-year old home builder that pioneered suburban development.

The Neumann Homes story is getting a little testy as countersuits are flying between Neumann and Tadian Homes, the Detroit-based builder Neumann acquired in 2005. Check out this story to learn more. Neumann vs. Tadian.

I spoke with Chuck Shinn, a regular Professional Builder contributor and industry thought leader, earlier this week, and he warns that 4 or 5 more builders are waiting in the wings. I’m sure there are more that neither of us knows about. I’ve heard rumors for weeks about major players who are on the verge of declaring bankruptcy or selling out or just shuttering the door.

We shouldn’t be surprised by this. This market dropped as quickly as any housing market in the last 40 years, and turning a big old battleship of a home building company requires fast and deft work.

What will be difficult about this is that the consumer press will report these instances as just more evidence of the failing industry. Look at how they reported the dismissals of CEOs from leading mortgage lenders CitiGroup and Merrill Lynch.

That raises a whole other question, of course. If home builders are performing so poorly, how come the only casualties we’re seeing are bankruptcies? The heads of the large builders remain in place and I have only heard small rumors about displacements of any of them.

I would not be surprised to see a bit of a blood bath – in companies and heads of companies – between now and the end of the year. The result will be tough consumer reporting on difficulties in our industry, making it harder for solvent builders to sell houses. The reality is this is just the next step playing out in a downturn that started a year ago. Nobody should be surprised, and everyone should remain calm. Do you think that will happen?