Home Builders Sucked Into Credit Crisis (LEN)(TOL)(KBH)

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As the financial crisis spreads quickly from Wall St. to other industries, two large home building projected have received default notices. The problems involve developments in Las Vegas where house prices has collapsed.

A project involving KB Homes (NYSE: KBH), Lennar (NYSE: LEN), and Toll Brothers (NYSE: TOL) has failed to make interest payments on $765 million in debt.

According to The Wall Street Journal, the project is spear-headed by a private company, Focus Property Group.

It is not clear how many other large real estate developments involving public home builders are facing near-term margin calls, but with the falling price of real estate, the problem in Las Vegas is unlikely to be that last one.That means that already weakened firms could face a credit crisis of their own as home prices continue to drop and the potential value of homes under construction face going on the market for a fraction of what they may have brought just a year ago.

Some of the large home building company stocks have lost over two-thirds of their value over the last year, and that may only be the beginning.

Douglas A. McIntyre