Bonfire of the Builders

Posted by: Dean Foust on August 7, 2007

bonfire.jpgI’d be remiss if I didn’t point readers of this blog to a package of stories that appears in this week’s print edition of BusinessWeek (the text of which is also available here at BW.com). The anchors of the package are two fine stories by my colleague Mara Der Hovanesian on how the rush by builders into mortgage lending only exacerbated the current housing mess (“Bonfire of the Builders”). Mara also takes a look at how, in their quest to slap up as many homes as quickly as possible, it now appears that some builders cut corners and left buyers holding the bag with problems like mold, leaky basements and such (“You Call This a Home?”). And that’s just the start:

—My fellow blogger Peter Coy has a companion piece (“Another Reason for Those Empty Houses”) noting how builders misread demographic demand for housing and overbuilt—leaving them with a painfully high inventory of unsold homes.

—Matt Goldstein and Roben Farzad collaborated on an article (“The Pain Moves Beyond Subprime”) on how the housing muddle is affecting Wall Street and the markets, and raises questions what happens when Wall Street traders and hedge fund managers all return from the Hamptons and Martha’s Vineyard in late August.

But wait! There’s more! Much more!….

--I pitched in with a story ("Seeking a Safer Financial Harbor") in which colleague Lauren Young and myself caucused about two dozen money managers as to what investors should be doing now (hint: Sell risk and buy quality.)

--BW's chief economist Michael Mandel weighed in with a commentary ("Lessons From Credit Disasters Past") that explores the burning question as to whether the mortgage mess will take down the economy.

--Lastly, while it's off the point of housing, I'll nonetheless mention that the package concludes with a really, really insightful case study ("The Buyout Boom's Dark Side") of how one leverage buyout that hasn't gotten much attention--Spectrum Brands, which owns Rayovac batteries, for one--might be a harbinger of things to come on the LBO front.

--And I haven't even mentioned some of the "Online Extras" that Mara produced for the web version of this package, including a slideshow of some of the "anti-builder" sites that burned-and-scorned homeowners have created to extract revenge on a builder who they feel sold them a headache of a house.

At risk of sounding like a shill, it's a pretty meaty package of stories.

One last thought: The folks over at Calculated Risk (a really good blog, by the way) raise the dreaded "Cover Curse" that has become part of magazine lore: When major magazines publish a cover story on a major trend, it is often weighing in late and hence, the cover inadvertently marks a turning point. Kinda a version of the old "Sports Illustrated Jinx" where the star pitcher being profiled on the cover goes out and gets bombed the next week in a big game.

I admit that BW has suffered its share of covers that were poorly timed. But anybody want to place a bet that the housing industry turns upward for good next week?

 

About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

BW Mall - Sponsored Links

Buy a link now!