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Warwick Simons's avatar

Mike - homebuilders give a good study on optionality. NVR only acquires land through options on those lots, and only exercises each option (on an individual lot) when they receive a deposit to buy a house on that lot. This strategy led to huge relative success for them vs peers in 2006-08 because they didn't need to write down the value of their land holdings as much (look at book value per share of NVR vs DHI & LEN over this period). Many builders have since copied their strategy and now control a substantial share of their land bank through options. This will help insulate them on any potential major downturn the next few years.

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Thomas Wolf's avatar

I’m from the Winky Dink generation. We put a piece of plastic on the tv and wrote on the screen...now I’m old and am writing on the screen.

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