What did US homebuilders do in 2008? Residential property market was really bad.
D.R. Horton revenue dropped by 41% yoy in 2008; loss of $2.6bn (more than 2x of 2006 net income) was incurred. Book value was only $2.8bn at 2008 YE.
But D.R. Horton maintained positive cash flows, scaling back expansion and selling inventories.
D.R. Horton started to pay down some debt in 2007 and did so in 2008 as well. It continued to do so until 2011. In 2012, it started to take on more debt.
Similarly for Lennar – revenue dropped 55% yoy in 2008 and incurred loss of $1.1bn. Book value was $2.6bn at 2008 YE.
It maintained positive operating cash flow, reducing supply (deliveries dropped 68% from 2006), pausing expansion and selling inventories.
It didn’t take new debts, but focusing on paying back.
