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KB Home co-founder says home prices could fall 20% more

Posted by: Peter Coy on April 29, 2008

Eli Broad.jpg
Eli Broad, the co-founder of KB Home, told Bloomberg TV yesterday that home prices could fall another 20%. Here’s a link to the story. That is an absolutely enormous amount when you consider that prices have already fallen a bunch. Today the Standard & Poor’s/Case-Shiller Home Price Index for February was released. It showed that the 20-city index fell 12.7% from a year earlier and is down 14.8% from its all-time high in July 2006.

I’m guessing that the execs at KB Home aren’t real happy with Eli Broad, because who’s going to buy a house now if they think that Broad is right about where prices are heading? I don’t know how many shares of KB Home that Broad himself still owns, but it can’t be too many because he doesn’t appear on the list of holders of 5% or more of KB Home shares in the latest SEC filing.


Trivia: KB Home was founded in 1957 in Detroit as Kaufman & Broad Building Company

Reader Comments


April 30, 2008 5:41 AM

Why does Editor Coy think that Mr Eli Broad would compromise the truth if he had owned more shares of KB? If I were Mr Broad I would feel insulted. Why does Editor Coy think we care how KB execs feels about falling housing prices or the economic forces must obey the wish or command of KB execs for high housing prices. KB execs are not the only people whose compensation are tied to high housing prices. To Wit: Real estate agents and seller offers various inducements to keep home prices artificially high: free carpets, free appliances/cabinets/kitchen-bath remodel, prepaid HOA dues, free landscaping, etc. Hence, the Shiller index is skewed by the "low balling" works of these shysters. The unadulterated home price decline is much higher. Given that housing prices nearly doubled during the real estate feeding frenzy, Mr Eli Broad's projected 20% decline is much too generous and kind to KB. If Editor Coy is wise and think carefully, he would suspect that Mr Eli Broad is trying hard to stabilize housing market for KB rather than its demise. As a seasoned editor of BW, Editor Coy needs to reflect on the facts in the news before "barfing." This article has revealed his naivete. After the demise of BearStearn and crippling losses at Citigroup, MLynch, WaMu, Wachovia, UBS, CreditSuisse, Barclay, HSBC, etc, etc, enough investors have questioned the true value of these cleverly packaged mortgage papers that Wall Street can no longer unload them on the gullible. The resulting liquidity crises that even the Fed can't remedy with $200Bil emergency injection and another $100Bil backup per month. The high crude prices, failing banks, falling housing prices, rising unemployment, and reduce consumer spending set the stage for the deepest, longest, meanest depression in US history.


May 7, 2008 3:47 PM

20%? I wish! I estimate that states like CA,Fla,NV and AZ, along with some other areas,will loose a total of up to 65% of 2005-level by 2010

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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.

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