As the glut of unsold home remains stubbornly high and housing demand slides, home builders face a dilemma: to sell, or not to sell? Lennar Corp., for one, has joined the “not to sell” camp at its development in Orange County, Calif. The Miami company plans to finish building 259 homes — the first phase of a 1,100-unit development in Irvine — but it has decided not to sell any of them until the constrained mortgage market and swollen housing inventory improves reports Michael Corkery in the Wall Street Journal online.
“We are better off holding off on sales at this asset and not discounting as steeply as the market is discounting right now,” says Emile Haddad, Lennar’s chief investment officer, who oversees the company’s large West Coast projects. “It doesn’t make sense for us to sell it in an environment that as strained as it is right now.”
Mr. Haddad says Lennar will monitor the Orange County market on a monthly basis, but “this might be put on hold for the whole year of 2008.” Lennar also is halting development of a large community planned near Angel Stadium of Anaheim, despite preparing the land to support the project.
Analysts expect more builders to mothball projects in the coming months, as they decide that the losses from selling homes at huge discounts are greater than the costs of carrying properties on their books. But it’s not an easy decision. Builders are facing increasing pressure from lenders to service their debt and also have overhead expenses to support.
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