With a $700 billion bailout on the way, people are wondering what effect this bailout will have on various parts of the market.
Going back to our special focus this week on Residential Construction, we spoke with analyst Ken Leon of Standard & Poor’s U.S. Equity Research about how the bailout will effect homebuilders:
“We think the federal bailout will help, number one, buyers’ confidence. Number two is the ability to reduce sizable inventory of existing and new homes in the market. The average is typically five to six months of total home inventory. We are about 10 months right now, which is still quite high but is beginning to come down each month. Number three, homebuilders, which are roughly one out of every seven or eight housing transactions, are pretty much on the sidelines. They have reduced most of their speculative building of homes, and they have significantly written off lots of inventory for improvement and land option contracts. The top 13 public homebuilders have written off, since the beginning of 2006, $25.6 billion through August 30, 2008.”
For the complete Residential Construction report, including full interviews with Mr. Leon and other analysts giving a complete overview of this space, click here.
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