John McManus Photo: Katherine Lambert

As we finish our annual “report card” covering the 14 public home building companies for this issue of BIG BUILDER, we're hearing that two iconic private home builders, one on each of the coasts, are in serious-to-critical condition vis-à-vis their lenders.

Two more venerated industry names could go by the boards before our magazine rolls off the presses and makes its unconscious way to the headquarters of these firms. They're both nanometers from defaulting on loans that could send them spiraling. Their future is in doubt. That's not to say for certain they won't make it.

The fact is that their respective principals have been through the wars off various ilks, across the decades, and across the worst of what housing cycles past could throw at them. That they keep turning on the lights every morning in 2011 is testament to preternatural resilience, the kind which one discovers is not entirely a rarity in home building.

Anyone outside home building might find it to be dismaying that organizations—especially ones so well established as pioneers, industry exemplars, and leaders in their fields—should be threatened with extinction at this late stage of the economic and housing downturn.

One comment from housing economist Bill McBride, author of the Calculated Risk blog, may help sum up the explanation. His conclusion about the mid-April release of the Wells Fargo/NAHB's Housing Market Index, which came in at a chronically anemic level of 16, was this: “Builders are still depressed, and the HMI has been below 25 for 46 consecutive months—almost four years.”

The vested and invested interests in home building are anxious. Among them there are those who ascribe to technicals when it comes to economic analysis and trending, and they believe house prices have yet to bottom because they're still not at their 100-year norm—which is down another 10 percent or so on a national basis.

Among them are those who believe fundamentals have begun to kick into gear that have or will place a bottom roughly where we are now, and that a tepid, economic upswing, devoid of much conviction, means households will continue to pent up, double up, save up, and stall out housing's full recovery for a couple more years.

Our discussion of management proficiency in last year's business environment tended, for most of the public peers, to focus on their respective knacks at working on their balance sheets for more favorable debt servicing; absorbing fixed costs through ongoing core operations; retaining talented people; mitigating one-time charges; reducing loss; and, in some cases, putting capital into use in what crops up repeatedly as a good thing: buying “well-priced lots.”

Now, “well-priced lots” we think are where home builders continue to have their work cut out for them in 2011. Clearly, we're seeing that as verdict of the 2011 spring selling season comes in, what was regarded as a “well-priced lot” 12 to 18 months ago may just not get a builder there in the latter part of 2011 and going into the first half of 2012.

Lots are the time-release mechanism by which home builders of any business model actually do their business. Much of the lot reload, starting in 2009 and running hard into the first several months of 2010, penciled for entry-level homes at a certain level of discount to 2006 peak prices. But whether it penciled for the price those actual homes will have to mark in at to sell is questionable.