New Home Builders; Making a Comeback???

New Home Builders; Making a Comeback???  The L.A. Times yesteday had an article in their Business section, "2 home builders jumping back in".  Then this morning, I read again that shares of Toll Bros., climbed 16%.  Pulte Homes, KB Home, Lennar and D.R. Horton each rose at least 5.7% for four of the top five gains in the S & P 500.  What's up???

Yesterday's article states that "managers of a $200 million fund plan to start making loans to developers for land and construction.  "We may not be at the bottom, but new homes are selling again." said one of the two partners.  "The market looks similiar to what it was in 1993, when a lot of real estate was being sold our of foreclosure.  The difference now is that the continuing credit crunch has made it difficult for developers to acquire even low-priced property."  The venture will be called Sentinel Capital Funding.

Here's the issue in my desert area...there is STILL too much standing inventory!  We don't have enough of the very low priced homes available, but the mid to high ranges are really faltering and I expect the numbers of REO's to rise in those price points through 2010.  The Banks have been holding back inventory..called "shadow inventory". 

This new building venture will be mostly in California and unless they are focusing on Senior housing, low income housing, multi-use development, green communities, they may need to re-think their ideas for another couple years.  Maybe this is exactly where they are going with these loans!!