GLG News by Homebuilding Joint Venture Experts

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

ARE HOMEBUILDING STOCK PRICE INCREASES PREMATURE?

April 24, 2008

Analysis of:Construction Companies Are Clamoring for Managers | online.wsj.com

Recently, stock prices of most public homebuilders have increased 20-30 percent.  This despite no visible signs of improvement in the overall housing industry.  It seems early in the cycle for these stock price upward movements, as it appears the housing market has not yet found bottom.  Equity buyers at the present stock prices must be patient and have a mid- to long-term perspective on their investments. There may be several reasons for the recent price appreciation including: 1. Short sellers covering positions as hedge funds encounter increasing risks in other parts of their portfolios or simply decide to concentrate their efforts in another sector. 2. A perception the government enacted or proposed initiatives will cause significant improvement in homebuilding activities, including sales and financing of homes. 3. A belief the housing downturn is at or nearing bottom and this is the appropriate time to purchase homebuilder stocks.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

IMPAIRMENT REVERSALS – IMPACT ON COST OF GOODS SOLD

April 24, 2008

Analysis of:New-Homes Supply Builds; Durable Goods Orders Slide | online.wsj.com

Homebuilders have recorded large inventory impairments over the last couple of years.  Most of these impairments have been for land and lots.  As these previously impaired lots are built on and a completed home is delivered, the land component as a percentage of Cost of Goods Sold may decline significantly.

Jim BelfiorePresidentBelfiore Real Estate Consulting

Northeast Phoenix Woes: No Market for Desert Ridge?

April 10, 2008

Analysis of:Developers seek relief in state land deals | www.azcentral.com

The limited demand within Northeast Phoenix should come as no surprise to the State.  The deceleration in home sales has created a surplus of finished and planned lots.  Despite current market conditions, BREC anticipates the market area continuing to hold value better than most Valley submarkets this year.  Land and lot demand, though, should trail a pickup in sales- which isn’t expected until sometime next year.

John BurnsPresidentJOHN BURNS REAL ESTATE CONSULTING, LLC

Economic Fundamentals Slipping Away

April 9, 2008

Analysis of:Are we or aren't we in a recession? | www.boston.com

Several national housing market indicators have been deteriorating at historically high rates in the last several months.  The downward trend of these indicators points to a national recession.

Jim BelfiorePresidentBelfiore Real Estate Consulting

Bernanke Call too Early, Needs to Focus on Homebuilders

March 6, 2008

Analysis of:Bernanke's Call: Aid Homeowners | online.wsj.com

Some homeowners with the means to pay their mortgage payments are halting those payments, walking away from their homes instead, accepting that they are upside down, and choosing 7 years of bad credit over an unknown period of negative equity.  If Mr. Bernanke is successful in his call to bankers- that is, lower the mortgage debt for those homeowners whose homes are worth less than their outstanding mortgage balance and “struggling” to make payments- fewer owners will likely walk from their homes in 2008.   Our question to Mr. Bernanke is: what about next year?  Prices are still dropping rapidly.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

Analyzing Homebuilder Risks

March 3, 2008

Analysis of:Decline in Home Prices Accelerates | online.wsj.com

There are risks associated with homebuilding assets and contingent obligations.  This article alerts the reader to areas of interest.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

Hidden Homebuilding Assets

March 3, 2008

Analysis of:Decline in Home Prices Accelerates | online.wsj.com

Homebuilding impairments and tax valuation reserves provide future accelerated income streams, when the recovery occurs.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

Accelerated Reductions in Book Value

March 3, 2008

Analysis of:Decline in Home Prices Accelerates | online.wsj.com

Issues associated with loss of income tax benefits result in accelerated reduction of book value in homebuilders.

David KellerFormer Chief Executive OfficerUNITED SUBCONTRACTORS, INC.

Joint Venture Completion Agreements

March 3, 2008

Analysis of:Decline in Home Prices Accelerates | online.wsj.com

Unforseen risks associated with homebuilder joint venture agreements and accompanying completion agreements.

Jim BelfiorePresidentBelfiore Real Estate Consulting

One Homebuilder's Auction and the Front Page

February 28, 2008

Analysis of:New-home bargains few at live auction | www.azcentral.com

Apparently, front page “news” is one way to boost new home sales.  Cachet’s inventory home auction, in which the builder reportedly sold 37 of 41 homes it hoped to sell, appears to have been a huge success.  New home auctions will likely gain traction in metro Phoenix in the coming months.  Hopefully, it doesn’t take disparaging front page articles, like the one that drove buyers to Cachet's auction, to build upon Cachet’s success.

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