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More Gore In Housing Land


Keep an eye on mid '08 as the timeframe when entire project foreclosures will start kicking-in in the Miami market.

As Prof. Shedlock recounted some of the gory details of housing, I felt the need to pile on by pointing out some even juicier – if not headline making – tidbits. The first comes courtesy of Comstock Homes (CHCI), which on Friday announced that net orders for the third quarter were... 3 (that's three without any zeros) and net new order revenues were -$11.5 mln (as in negative revenues).

For the entire month of September, CHCI managed to close on four units at The Eclipse project, which is becoming pretty much synonymous with the faith of the company. Mind you, The Eclipse is a terrific development if only at half the prices for which it is being pitched. The company is back negotiating covenant waivers, but the "big enchilada" looms in January of 2008, when the already extended, limited-recourse $40 mln balance on The Eclipse loan comes due to Corus Bank (CORS). To pay that off CHCI will have to sell more than 100 of the remaining 145 units, not a likely event at the current pace.

Still, CHCI is in great shape when compared to Tousa Inc. (TOA), which recently hired Lazard to advise it on its capital structure, i.e. "Please tell us how to get rid of our billion dollars' worth of debt because we don't really like it anymore."

And then there is Standard Pacific (SPF), whose stock price slinked below the $5 mark, putting its equity market cap at less than 25% of its $2 bln in debt. Incidentally, the seven-year portion of that debt is back to its lows of 70 cents of the dollar for a yield of 13%, and its Credit Default Swaps are breaking to new highs.

If you are thinking "Please tell me something new", let's try this:
  • In the Washington area market, the one insulated from downturns by the Federal government, demographics, etc; condo cancellations in July and August were 124% of condo sales.

  • Chatting with some contacts in the distressed-debt world, they are now making it known that a bunch of homies would be better off filing for bankruptcy now – when the general economy is still ok - rather than waiting for a possible recession.

  • Keep an eye on mid '08 as the timeframe when entire project foreclosures will start kicking-in in the Miami market.

  • While by some accounts the credit markets are back throwing money at companies as if it were going out of style (and maybe it is), many law firms are beefing up their bankruptcy staffs to full force; and if there is one constant in the economy it is that lawyers rarely lose.
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Position in XHB.
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