Did Home Builders Trade Off Better Land Pricing to Juice Cash Generation?

Cliches do their work and get tired for good reasons. They're often annoyingly obvious and aggravatingly true. "Be careful what you wish for," for instance. Way back when--in December and January--as we were tallying up Net Operating Loss tax refunds home builders recouped after the extension from 24 months to 60 months backward, the clawback number quickly climbed well north of $2 billion without so much as breaking a sweat. "That was the stupidest thing that ever happened," said one of our highly placed public home building company executives. Right about now, after a phalanx of home builders completed an 18-month tear to devour finished home lots everywhere at prices that swelled to double or triple distressed-deal pricetags, the sense of this comment, "the stupidest thing that ever happened," becomes clear. When you think about it, home building's biggest beneficiary of an NOL refund--Pulte--already had enough land, so it didn't need to participate in the '09-'10 run on finished lots. Too, the No. 2-ranking NOL refund recipient, Hovnanian, probably did use some of the windfall for land purchases, but most likely banked the lion's share of the tax rebate for operations.

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