With all the home builder news out this past week, readers suggested related topics. "How about a ranking of public homebuilders in order of likelihood of implosion i.e. weakest to the strongest? Nominate your 'favorite' HB below for inclusion!"

One nomination, "From the bigger builders i vote for WCI. The first quarter 07 will be the make or break for them. They think they can sell the new condos. Good luck."

Another said, "The homebuilders are screwed a lot worse than many think they are, especially smaller private developers and builders. Not only will they have massive inventory write-downs when they can’t sell the land for what they bought if for, but they also have massive interest expense built into the homes they are building."

"I was just looking at KB’s latest 10-Q and saw that the amount of capitalized interest this quarter almost doubled from last quarter (up $50m+) and inventory climbed by over $2b. That 'additional' capitalized interest..represents an unusual high level of inventory on the books. Writing down their inventory by 30% would wipe out nearly all of the companies equity. And KBH is one of the stronger companies."

"This same dilemma is also affecting smaller home builders across the country. Massive bankruptcies with developers all over the place. They simply can’t sustain the level of inventory they have. They have to move it quick."

And another, "Why does the stock market have such a hard time figuring out the obvious? Why does the market not quickly price in common knowledge? When the conundrum ends, you can be sure the homebuilder share prices will have reverted to pre-Y2K levels."

One on Ryland Homes. "I know that Ryland is discounting inventory homes heavily & renegotiating deals with current contract holders to keep them in line, after only offering incentives in the spring. So maybe they can ride it out if they play it smart and build smaller & cheaper homes to keep the first time home buyers in their niche."

The LA Times. "Irvine-based Standard Pacific, which builds houses in California, Texas, Arizona and Colorado, will lower its earnings forecast for the third quarter and 2006, after new-home orders fell 58% in July and August from a year earlier."

"'We expected to be down year over year, but not to this degree,' said Andrew Parnes, Standard Pacific's CFO. 'Clearly it's turning out to be a more difficult situation than we thought at the beginning of the year.'"

From Reuters. "Leading U.S. home builders appear to have adopted one of two strategies to endure a rapidly deteriorating housing market, based on differing bets on just how long the slump will last and how bad it will get."

"In one camp, which includes Hovnanian, Lennar and D.R. Horton, are companies that will prop up home sales by cutting prices."

"In the other, including Toll Brothers, KB Home and Ryland, the companies plan to hold prices steady but sell fewer homes, to protect operating margins."

"'You don't want your customers to get used to aggressive incentives,' J.P. Morgan analyst Michael Rehaut said. 'Obviously, the auto industry has continued to find itself in that position and it's not a good position to be in.'"

"Hovnanian discounted prices in weaker markets, such as southeast Florida, which went from one of last year's hottest markets to what Chief Executive Ara Hovnanian called either 'the worst market in the country' or one of the worst."

"'It is clear that the significant decline in our pace of net contracts per community has been partially offset by our growth in communities, which has kept our absolute number of sales from falling more substantially,' CEO Hovnanian said. But net contracts per community stood at 7.7, down almost 40 percent from a year earlier and the lowest in 10 years."

"On Friday, Lennar warned that its use of incentives was one of the reasons that earnings for the most recent quarter would fall short of its prior forecast. But it also said orders declined only 5 percent for the same reason. Horton and Lennar are two of the most tenured management teams, said UBS analyst Margaret Whelan. 'You would think they'd be the best operators in a correction like this. It's the worst strategy. They're going to have the most margin erosion because of that.'"

"'But if the market gets much worse in '07 and '08, Horton is going to look like the smartest guy in the room,' Whelan said."

"Toll offers 'incentives.' Although gross margins declined 410 basis points, they still topped 29 percent, analysts said. However, Toll issued a forecast that implied new orders will start to significantly improve over the next two quarter."

"But Raymond James' Rick Murray had his doubts, given that Toll's orders fell 48 percent in the most recent quarter. 'We believe a rebound in fundamentals is not in the foreseeable future,' he said."