Home Builder Execs Like Wall Street Fat Cats: In the Money
Wondering who ended up with all the money after the housing market collapsed? When the market started to fall into recession, there was a huge outcry against the ridiculous paychecks and bonus offers the banking industry and wall street executives ended up walking away with. One group that escaped a great deal of scrutiny were the builders that stopped building homes, started massive unemployment problems by laying off most of their workforce, and raked in the bailout money right alongside the banking and automotive industry. Read on for a little bit about how builder executives came out ahead even while their industry collapsed.
Home Builder CEO Pay During The Crash
Wall Street, banks, and the automotive industry got quite a bit of scrutiny for the way CEOs were being paid during financial collapse. Home builders, on the other hand, were completely ignored. The biggest ten homebuilding companies had an average CEO paycheck of almost $6 million dollars a year during the two worst years of the recession even though they laid off more than half of their workforce and lost a huge amount of money. The people defending this practice claim that home building is a cyclical business that will go up and down no matter how good a company's leadership.
Builders Protected From Failing
When the federal government created the homebuyer tax credit program for first time buyers, home builders benefited right along side the buyers. Every penny of tax credit that was given to someone for buying a new home ended up landing in the hands of a home building company that may have otherwise failed. The tax credit ended up becoming a multi-billion dollar buffer to protect the builders who made bad decisions during the housing bubble.
Public Companies Run Like Private Firms
One strange thing about the home builder industry is the way these companies tend to behave when they go public. In most cases, a company that goes public starts to scale back the highest executive salaries in favor of increasing the value of the company as a whole, which benefits the new public owners. However, many homebuilder companies have original company owners and founders sitting in those high paying jobs, making the chances of that pay decrease actually happening go down quite a bit. The CEO of a home building company stands to make at least four times as much money as the CEO of a company selling something cheaper.
Many factors contributed to the overall high pay home building company executives and CEOs received during the housing crisis. Part of the issue came from government money propping up the housing industry in general, allowing home builders to profit when the economy would not have otherwise supported it. Part of the issue also comes from the way home building companies are run in general. No matter why it happened, it is ridiculous that the automotive industry, banking industry, and wall street executives received such a high level of scrutiny for engaging in the same layoffs and economy damaging activities that home building industry executives seem to have engaged in without consequence.
Questions and Answers
A number of new statistics and reports out now will be of interest to real estate entrepreneurs and home buyers in the Austin, Texas area. The Austin Board of Realtors is reporting that for the first June in five years, sales of existing homes in Central Texas have dropped. In fact, in June 2007, sales dipped 6% from the same time one year previously.
Residents of the Hancock neighborhood in central Austin have witnessed the ramifications of transforming what was the former 23-acre Concordia university campus into a $750 million dollar urban center with 100 foot high buildings rising up above the ground. However builders and neighbors do look forward to creating new shopping, restaurant and office space within walking distance of their homes.
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