Hacker News Reader

Comment by JumpCrisscross | Hacker News Reader

> Developers are more likely than individual owners to be able to wait out a downturn -- they're more likely to be well-capitalized

Source? I thought developers tended to be leveraged.

View on HN

Not only more leveraged, but with significantly more dangerous debt terms (construction loans that need to be refinanced after 12 - 18 months and, in the multi family space, interest-only ARMs — remember those? - are common.)

So the outcome will be half-finished houses, or rushed with cheap materials?

After 2008, I read a story about the first (and only) person to buy a home in a half-built neighborhood. He was fully moved in before the crash. There were abandoned construction sites and empty home there when the developer went bankrupt. He mowed the yards all around him to keep the wildlife away from his home. He was in despair, understanding he could not sell him home to anyone. I assume someone acquired the neighborhood a few years later and completed the project, but it must have been 5 years before any developer started resuming construction at a minimum.

that reads like a great premise for a horror story.

>He was in despair, understanding he could not sell him home to anyone

Was that really any different than anyone else in the 2008-2012 market unless they wanted to take a massive loss?

That's a possible outcome, and was a common sight back in '08.

Another outcome is the banks take back the properties en masse (happened in the early '80s during the last inflation scare, and also in '08) and slowly sell off the properties to investors in REO[0] auctions.

0 - REO or "real estate owned" is what banks call properties they've foreclosed on and taken ownership of. They generally want to get these properties off their books as quickly as possible and in the past have been willing to sell them at or below their cost basis.

Reply on news.ycombinator.com