The starts were down 39% year over year to 2,724 and the 191% backlog conversion ratio I would not expect it to be a side going forward because we did have a higher number of completed unsold homes that we are able to move and turn into deliveries quickly this quarter. So I would expect that conversion ratio to come down a bit and the balance between what’s started and what’s sold first continues to be balanced. It’s been running about 50-50.
Stuart A. Miller
One of the things that I think is noteworthy in particular as I have gone out to the field, I have seen that our cycle time is coming down dramatically just by a force of focus. So that impacts our ability to start to deliver in greater proximity to point of sale.
Ivy Zelman – Zelman & Associates
Great. Thank you for that. Just secondly, with respect to your opportunities to go out and capitalize on some of the distressed we look at your---however, we got your total lot count but roughly like a 5 to 6-year supply the way we calculate it in total and realizing that you might have opportunities, some are out there, we hear frantically looking for finished lots and trying to tie them up through soft takedowns and minimizing cash outflow, some are buying them and paying more than investors would pay and maybe a more opportunistic angst what they think the market will be or just generally more upbeat but also that the finished lots are diminishing in your overall portfolio in that you can’t develop ground right now because ground is arguably still too -- the original value is either negative or too low so you can’t put money in the ground. When everybody says those want to buy land the first question I get Stuart from every client is why the hell do they need land? It’s obviously helpful I think for everyone to explain how you balance that because you do have that returns that are going to be negatively impacted by carrying as much land as you have on the books despite the fact that you are saying you want to go out and buy land. Maybe put that in some perspective so that everyone is going to understand that.
Bruce E. Gross
Yes, thanks. I think that is helpful. The answer to that question is that when we look at the corporate level and we say okay, how many homes do we have divided by how many are we delivering over the course of the year, of course we can come to a 5, 6, 3 whatever number of the year’s supply but really when you operate the business you have to do at the local level and so while we might have land positions that are holdovers from prior purchases that might be larger land positions that have large number of home sites those positions might be absorbing at a disproportionately small level relative to -- we might have a 10-year supply in one place and a zero-year supply in another so when we are saying we are looking for land opportunities and maybe purchasing we might be purchasing a new community or additional home sites in an already existing well-run community where we have a short supply and yet in another part of the company we might be oversupplied. You are absolutely right. From a return on investment position it would be far more efficient if we could divest some of those longer term land positions but the market doesn’t afford that opportunity right now and those inefficiencies will remain embedded in our company’s balance sheet for some time. And I think that’s across the industry.
So our program is to look very locally community by community, find stabilization in each of our division, get to either breakeven of profitability and then add organically with low cost home site by home site position. Now you have also noted that there are others also that are looking for home sites frantically. In some markets there are precious few available, in other markets there are home sites available. So you can’t really listen to what one builder or another is saying because they might be focused on certain markets and not focused on others where we might be focused.
While we tend in this conference call look to that level when you get down to the division level and community by community the view of the market and the opportunities that exist are very different on locale by locale.
Ivy Zelman – Zelman & Associates
That’s perfect. Thank you for that. And lastly if I could sneak another one in, your comments when you opened were helpful and you sounded more optimistic, admittedly cautiously optimistic than you have been in a long time, what do you think about the tax credit going away and mortgage rates approaching 6%. I know that we are starting to see a little bit of following and it might just be summer, (inaudible) but isn’t it -- I think you said it’s worrisome but is it possibly portfolio demand because in fact people were purchasing and taking advantage, especially in California with the $10,000 new home tax credit that is not likely to be getting more money above the $100,000 million that they have allocated from what we are hearing.
Bruce E. Gross
My personal perspective is that from a demand standpoint we have pushed demand to a very low level. If you look at overall home transactions, not just new home transactions, not an annualized program of 340,000 but nationally I think you are under 5 million a year. We probably need to transact more than that in order to keep up with population trends. But today the economic environment is depressing that demand.
Ivy Zelman – Zelman & Associates
Is it also because your home ownership rates are 67% and are you believing you have people that maybe the demand isn’t going to be as significant, especially with home ownership rates so high.
Bruce E. Gross
Well, I think that we can only guess at the answer to that question because we can put really, really smart people together in the room and they will disagree. There are a lot of people who study this full-time who say that the demand is much greater than we are seeing and then there are others who say that hey, we have got too many people living in owned homes. I respect the debate. My personal perspective is that we are building pent-up demand and at the more normalized time we are going to see it is going to reveal itself. I feel like we are already seeing that.
I think that in prior quarters and what I was trying to suggest, in prior quarters we have seen a lot of activity out there that was primarily dominated by investors who are trying to make money on trading deals. I am seeing a much more fundamental primary purchaser enter the market today and I am not talking about our market. I am talking about the broader existing home market. We are seeing -- when we see foreclosures out in the field that the people showing up to make these good deals are people who need primary housing.
And now how the market is actually going to reveal itself and evolve over the next years I don’t know but I do think that we have population pressures that are ultimately going to turn into pent-up demand and undersupply demand at a point. So, I think we are in for a rocky road for the short term, at least over the next year, maybe two, but at some point that’s going to turn on itself. It’s my perspective.
Ivy Zelman – Zelman & Associates
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