Two Builders Report Wednesday; Expect Little

Homebuilders Ryland and Pulte are reporting tomorrow. Don't expect much. There will continue to be significant pricing pressure & writedowns.

Here's the key for the homebuilders. They need to:

-reduce inventory to generate cash

-raise capital

Capital raising is likely, because they are not generating enough cash flow to fund their public debt that is coming due.

Expect more builders to default on their loans, so banks will own more real estate assets, which they will sell at a deep discount.

Already, builders with February quarter ends -- KB Home and Lennar -- reported dramatic declines in sales. At UBS, they are expecting new home prices to decline an additional 10-15%, or ~35% cumulatively in the hottest housing markets.

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