Several builders just went bankrupt Part 2 - Yes, ANOTHER builder just had a large land foreclosure

[centralaustinite]

Talk about timing!

Colonial did fail today:
FDIC: Press Releases - PR-143-2009 8/14/2009

[inthecut]

Originally Posted by centralaustinite

Talk about timing!

Colonial did fail today:
FDIC: Press Releases - PR-143-2009 8/14/2009

Let's hope the financial mess gets mopped up quick so we can move on with Austin growth.....

[orbius]

They're also unwinding Guaranty bank, I havent seen it turn up on the FDIC press release but its known to be bankrupt. Who knows what the ramifications of that will be. Its based in Austin and has over 100 branches in Texas with over 13.4 billion in assets.

[loves2read]

but some banks were smart--they understood what a bad decision lending money to developers and people w/o real cash was going to be--
there are a couple of banks that just refused to become part of the boom when they could see it would bust--
THEY are the ones buying up the failed banks and other interests than can be worth money once the bad debts have been called to account
Beal Bank--I think--in Dallas is one of them...independent--owned by basically one man who told his board just to be patient when he started becoming less active about 4 yrs ago...
he has been buying all kinds of properties that people have to off load for pennies on the dollar...

[centralaustinite]

Originally Posted by orbius

They're also unwinding Guaranty bank, I havent seen it turn up on the FDIC press release but its known to be bankrupt. Who knows what the ramifications of that will be. Its based in Austin and has over 100 branches in Texas with over 13.4 billion in assets.

Oh yes, everyone knows that Guaranty is the walking dead. It is a big bank and I'm sure FDIC is shopping it around looking for a buyer but it might take a while. I know folks who have been looking for that bank to show up in the Friday closing list of the FDIC for months and months. It will happen, the only question is when.

[HappyTexan]

Originally Posted by centralaustinite

Oh yes, everyone knows that Guaranty is the walking dead. It is a big bank and I'm sure FDIC is shopping it around looking for a buyer but it might take a while. I know folks who have been looking for that bank to show up in the Friday closing list of the FDIC for months and months. It will happen, the only question is when.

That's a big one though so I'll bet the FDIC is being careful with that one.

[inthecut]

Originally Posted by HappyTexan

That's a big one though so I'll bet the FDIC is being careful with that one.

Good point per the "careful" timing of the "Bomb Dropping"...the main issue is to avoid as little collateral damage as possible....large events can trigger fault lines to implode, so dragging things out, and keeping things on even keel are top importance...worse scenario is that all investors panic and preclude vital money needed to maintain Austin's growth vectors...if economic growth stops, and population growth increases, we could have another Las Vegas on our hands....namely a situation where the "we have no jobs" meme can't keep up with the "Austin has ALL the jobs" meme...

[CptnRn]

Several builders just went bankrupt Part 2 - Yes, ANOTHER builder just had a large land foreclosure

It is important to recognize that the articles on foreclosures that we have been seeing lately are about "residential subdivision developers" going bankrupt. Not "home builders". The distinction here is that the "residential subdivision developers" are more prone to bankruptcy because they have to take on huge chunks of financing so they can buy up and develop large tracts of raw land, subdividing it into hundreds or thousands of lots, installing utilities, etc., usually before they can find buyers and sell it off a few lots at a time. They can't just build and sell one lot at a time. They have to develop the subdivision in significantly large tracts in order to attract customers. This means that if the economy slows and no one is buying lots, the developer can be left holding substantial chunks of land and debt, and is probably at high risk of foreclosure.

A typical "developer" often has 3 or 4 different "home builders" building houses on the lots in the subdivisions they developed.

Typically home builders are at a lower risk of foreclosure because they buy up only a few lots at a time, as they need them. They build at most a few demo houses to attract customers, waiting until they have firm financial commitments from home buyers before building additional homes.

My point is that this was probably predictable, since the residential real estate market has been slow for over a year, it doesn't surprise me to read about some of the "developers" who have been holding all that land and debt all this time, are now defaulting on their obligations. I would be far more alarmed if we were seeing several large home builders going bankrupt, as the way they do business they are usually less extended and so have a lower risk.

The land isn't going anywhere, the property will be auctioned off to someone who can afford to hold it for a later sale or for development when home sales pick back up again.

[inthecut]

Originally Posted by CptnRn

It is important to recognize that the articles on foreclosures that we have been seeing lately are about "residential subdivision developers" going bankrupt. Not "home builders". The distinction here is that the "residential subdivision developers" are more prone to bankruptcy because they have to take on huge chunks of financing so they can buy up and develop large tracts of raw land, subdividing it into hundreds or thousands of lots, installing utilities, etc., usually before they can find buyers and sell it off a few lots at a time. They can't just build and sell one lot at a time. They have to develop the subdivision in significantly large tracts in order to attract customers. This means that if the economy slows and no one is buying lots, the developer can be left holding substantial chunks of land and debt, and is probably at high risk of foreclosure.

A typical "developer" often has 3 or 4 different "home builders" building houses on the lots in the subdivisions they developed.

Typically home builders are at a lower risk of foreclosure because they buy up only a few lots at a time, as they need them. They build at most a few demo houses to attract customers, waiting until they have firm financial commitments from home buyers before building additional homes.

My point is that this was probably predictable, since the residential real estate market has been slow for over a year, it doesn't surprise me to read about some of the "developers" who have been holding all that land and debt all this time, are now defaulting on their obligations. I would be far more alarmed if we were seeing several large home builders going bankrupt, as the way they do business they are usually less extended and so have a lower risk.

The land isn't going anywhere, the property will be auctioned off to someone who can afford to hold it for a later sale or for development when home sales pick back up again.

Well, cap, you explained a situation I wasn't completely familiar with....true, with all the subcontracting, hard to say who is holding the ball at any one time...that ball also unravels on the other end when financing falls though and bills/responsibility have to be metered out.....simply a way to maximize coverage while limiting involvement....each party gets what they need/desire, and everyone, in the end, usually makes money and gets paid....When Subdivisions unravel, it is much like disturbing the soil under a rainforest..shaking out all the critters involved and tied into the transaction....and realizing how tenous that little section of the biosphere was......how eash party vitally needed the other in a symbiotic sense to maintain itself...

As we mentioned earlier, developers carried lots of land on the books as a future hedge, or just so the prime stuff wasn't gobbled up by another player....when the piper stopped playing, they were on the hook for all that carrying capacity, and some are paying for it through bank repossessions/bankrupcy....and
indeed, the land isn't going to sprout legs and walk away from Austin.....just other players will be involved, and a far more moderate pace/game will be played with the same......as the gentleman in the article mentioned, "The days of 'Investors Gone Wild" is definitely over".......

SIDE NOTE....I noticed that many of those "developers" were from out-of-state, so could this be a case of good riddance?.....maybe its a chance to jettison out the interlopers that were jacking up the prices of homes and whoring "free" public services from citizens already strapped paying high property taxes for the same.....At the very least, Austin residents won't be paying to set up public services for out-of-area interlopers looking to make a fast buck out of Austin, and perhaps destroy it in the process!