The Vultures are Circling

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skeptic_IHB

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<p>Interesting Bloomberg article today on vulture investors. <a href="http://www.bloomberg.com/apps/news?pid=20601109&sid=aKTFOoHM.Jww&refer=home">http://www.bloomberg.com/apps/news?pid=20601109&sid=aKTFOoHM.Jww&refer=home</a> (Lennar's New Homes Fetch 60% Less as U.S. Market Slump Deepens).</p>

<p>The article suggests that the Lennar/Morgan Stanley deal 'set the market' at 40 cents on the dollar. Won't these communities pull down comps significantly because the vulture investors could reduce prices by 40% and still make a profit? Or will the vulture investors be sitting on these homes/lots for a while?</p>

<p>Thoughts?</p>
 
<p>The vulture investors are buying land (raw land & buildable lots) and condos.</p>

<p>With the land, the investors will wait until the market come back & sell the land back to the builders for a profit. AKA "land banking".</p>

<p>With the condos, they will rent them out because the condos will be cash-flow-positive-rentals at those prices. The "40 cents on the dollar" discount is from the "market peak", not from "current market price". I doubt that these investors will flip the condos right away.</p>
 
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