How do you like the residential real estate market now?

Implications: No matter the price or terms of the B of A-Countrywide transaction, you’ve now got a combo that dominates the market in a way that looks like GM/Ford/Chrysler in the auto industry. In a business that was traditionally fragmented, twenty years of Wall Street activity in the era of the PC has rolled the number of competitors up. Throw in the banks and others like FNMA and FHLMC walking the financial streets of the earth looking for make-up capital and you’ve also got a busted-up industry. 

Analysis: If you’ve got a position in residential development land and you anticipate funding through yesterday’s sources, you’d better figure out why you’ve got the advantages over other borrowers in the competition for those dollars. Two factors you’ll be needing an answer to are pricing of funds and higher equity requirements. For sure, you won’t have the leverage available in other recent times. You better also figure out who your builder customers are since yesterday’s big boys are going to be much smaller conservatives when the blood recedes from the streets. As a result, you’re going to have to finance your customer builders too in order to get a product up on your land. When you figure out how much all this costs to your residential land development bottom line, you’ll see that the costs may mean that you’re just putting good money after bad in order to proceed. Many if not most should just shelve the project and hold on for the time of recovery even if it’s twenty years off. Hope you can.