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October 16, 2007



I think I will pat myself and my team on the back with this one. This Ryland model was created before the CFO of Ryland came out with the following newsbite: "RYL cancellation rate is about 50% for Q3: Gordon Milne, CFO Ryland Group: Half of Ryland's (RYL) buyers backed out of their contracts in the most recent quarter… and the company had to lay off 30% of its staff… [and its combining offices in Florida and California]". See http://www.usatoday.com/money/economy/housing/2007-10-08-home-builders-downturn_N.htm

Our cancellation forecasts were right on the money, while most other sell side houses were much too conservative. Hey, if I don't give myself kudos, who will???

Merkin Muffley

Reggie, your research seems very thorough; your reasoning incontrovertible.

I worked for a lot developer as a number cruncher for a few years recently. Unfortunately, I concluded that our strenuous efforts grading and building road, water and sewer infrastructure created virtually no added value - land appreciation appeared to account for all of our profits.

Observing that we'd have made more money doing nothing after entitling the land, I began to wonder whether horizontal development is a rational endeavor. No wonder homebuilders find (perhaps until recently) their mortgage operations to be such a large profit center!

I'm surprised you don't get more comments. Keep the posts coming!

D Bell

You must be the guy that writes the Florida builder blog on Motley Fool Caps, right?


I'm surprised I don't get more comments either! I have an interesting followup to the Ryland post that I will put up some time tonight or tomorrow. The idea came from the ex-president of Ryland himself, at least partially.

@D. Bell
No, I am not the Florida builder guy, but I am a big fan of his writing, which is why I include some of it in my blog. I have a few contacts that are quite knowledgeable in several of the more publicized fields, some of whom will occasionally post a piece or two. Stay tuned.


BTW, Merkin. Horizontal development is rational in a normal market. The heated bubble compensated speculation over fundamentals. I noticed the same thing in own my property transactions. My most profitable transaction involved no physical improvement to the property, and believe it or not my least profitable transaction involved the most physical development. This is anecdotal, of course, but does support your experiences.


That's funny you mention that. I have had the exact same experience with my most profitable transaction involving no physical improvement and my least profitable transaction involving the most physical development.

homes for sale newport coast

I would be led to believe that management is trying to prop up the price of the stock through Company’s own resources via a share repurchase program.

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