Archive for March, 2010


Posted March 29, 2010 By Fletcher Groves

(the intrepid, results-based consultant is the main character in both editions of The Pipeline: A Picture of Homebuilding Production™)

The intrepid, results-based consultant reclined into the sand, at the back edge of one of the dry eddy pools, where the beach resumed its slope more steeply upward, toward the dunes. She dug her bare feet into still-wet sand, and felt the remnant of last night’s high tide through her jeans and shirt. It felt good, she thought, as she rested her arms on her knees, gazed eastward, and studied the movement of sea and sky. She smiled, as she felt the morning sun, now 20 degrees above the horizon, as it warmed her face, on what was still a chilly morning, even though it was the beginning of April.


Easter 2010, Ponte Vedra Beach, Florida

She was comfortable in her element. A native Floridian, she loved the waters of her home state, although, she wished she could have seen for herself the Cracker Florida her dad liked to tell her about, the Florida of his youth, as he would describe it, before air conditioning, before hordes of people, certainly long before interstates and theme parks.

This was her routine, every year, on Easter morning.

Her thoughts went back to the very first Easter morning, to what the disillusioned friends and followers of the one they called Jesus of Nazareth must have been thinking, as they hid in fear. As far as they knew, this man of so much promise, in whom they had placed so much hope, was dead. They had seen his death with their own eyes. There was no question about it. Roman crucifixions did not leave much to the imagination.

Then, her thoughts moved to a time, not far removed from the darkness of the days immediately following the death of Jesus, as Peter publicly asserted that he and the other followers were also the eyewitnesses to His resurrection, and that, far from abandoning their faith in fear for their own lives and living in hopelessness, they were willing to live for the lives of others, and for the faith and the hope that His crucifixion, death and resurrection gave all of them.

So it has been, that decision, she thought, for every Christian, ever since. So it was for her.

She smiled again, and then whispered.

“He is Risen”.

The Death of Private Homebuilders?

Posted March 2, 2010 By Fletcher Groves

John McManus ( is always an interesting and worthwhile read, particularly his two most recent entries (PRIVATE HOMEBUILDERS MOMENT OF TRUTH APPROACHES WITH 2ND HALF OF 2010 and ORLEANS HOMEBUILDERS FILES VOLUNTARY CHAPTER 11).

Orleans Homebuilders, of course, is a publicly-held company.

One of John’s points: “Private home builders are in a fix because most of them depend heavily on banks, and banks are in a fix. The recent increase in the Fed Discount Rate doesn’t mean a lot to most of us, but it certainly doesn’t bode well for businesses that draw on bank capital with the intensity that home builders do. If it’s more expensive for banks to borrow, it’s going to be more expensive for their commercial customers to do so, one way or another, and it will be in shorter supply.”

One can debate the ultimate winner of this seeming game of chicken between builders and their lenders (include the FDIC if you want to triangulate it). Perhaps survivor would be a better term. Or, maybe, it is just some financial version of the Circle of Life, in which new versions of builders and TARP-less banks emerge as new creatures, eerily traversing the post-apocalyptic landscape, past the skeletons of the previous Era of Homebuilder Entitlement.

Long, long ago, before I became a builder, before I became a consultant, I was a banker, more specifically, a commercial and real estate lender. I have long memories from being on the other side of the table, but my most vivid recollection, from the disaster that was playing out in 1982, was the observation/advice offered by my Dad, who was also a banker:

“Son, leverage is something that makes good times better and bad times worse”.

The jury is maybe still out, maybe for awhile longer, but “out” is the operative term, the words of builders and lenders to each other echoing like the lyrics of an old Hall and Oates song: “You’re out of touch. I’m out of time.”

In mid-2009, I posted an entry to “Escape from Averageness”, titled “Apocalypse Now: Is a Shattered Industry What it Takes?”. It is archived. You can read it again. But, it bears repeating. Two of the points about our vision of this post-apocalyptic Fixed Residential Investment landscape were that it would be one in which builders achieve 6:1 Inventory Turns, and therefore, need negligible working capital for production operations, and one in which cash on the Balance Sheet is not the defining competitive advantage.

To which , I would add, it would be one in which builders do not even use debt financing for land and lots, let alone allow it on their Balance Sheet.

We shall see.