John McManus Photo: Katherine Lambert

We hosted the Housing Leadership Summit in Chicago for the single-family new-home industry's leaders the second week of May, and it was fun.

Not in 36 months or more could the word fun have even remotely described the tenor of a home building executives' event. This time, though, public CEOs spoke with the first faint taste of profitability, and private leaders were at it cobbling confidence-laced work-arounds to getting bank loans to buy and develop lots, and build houses.

“We're by no means out of the woods, but ...” captured the spoken sentiment. Meanwhile, in their physical mien, one detected sparks of a strut and swagger there'd been no signs off for three solid years.

Yes, there were profits or near profits, one or two quarters in sequence, based on a gross margin management and math that modeled improvement with each succeeding financial period. Yes, there was deal flow, at least on a project finance level, and it seemed genuinely as if cunning, compromise, and customer focus might actually carry the day as privates' answer to publics' facile access to a briefly open window in the debt markets.

What mostly felt different is that you heard these executives start to talk about what was working. They didn't pretend to understand why, they just knew products, projects, and processes had started to take hold. The gap between bids and asks was now and then closing to a point where guesstimates on value began to materialize out of clouds of inertia.

That was then. Twenty days earlier, catastrophe struck the Deepwater Horizon drilling rig in the Gulf of Mexico. In early May, among home building's leaders, “the spill” factor hadn't yet been recognized as a national catastrophe and an economic downer. That would start a week or so later, after failed attempts to cap the gusher and images began to blotch the zeitgeist.

A month later at the Pacific Coast Builders Conference, any vestige of the feeling of fun was gone. Defiance, resilience, even brilliance, in some cases, but nary a hint of strut and swagger.

What had come and gone was the putt-putt motor of a trillion dollars of Treasury stimulus money making its way into housing through April, via tax credits for home buyers and mortgage-backed securities purchases for the housing industry.

The putt-putt cut out, and the wind didn't pick up, mostly because wind in the sails of housing wouldn't happen during the summer even in a good year. Before home builders became prey to Wall Street's tyranny, their leaders often would go on long vacations, and fish, golf, or do just about anything but think too much and read the financial pages.

The April 30 deadline for orders of new homes—the end date for settlements has been shifted from June 30 to Sept. 30—divided 2010 into two separate time periods within a single calendar year.

“At least internally, we're doing two year-ends this year,” the CEO of a public home building company told us. “One year-end is everything to do with the tax credit, so we'll count all our business through June 30. The rest of the year will go toward the Dec. 30 year-end. We still don't know how the back half is going to turn out, but looking at 2009 and 2010, we believe 2010 is the bad year.”

What can be said about the back half of 2010 is that there are only four kinds of home builders left:

  • Those who have cash enough;
  • Those who have cash but need more;
  • Those who don't have cash but don't need it; and
  • Those who don't have cash and need it.
  • Might as well at least enjoy July and August fishing.