Ripples

1/3/2008: David Streitfeld: With Builder in Bankruptcy, Buyers Are Left Out

New York Times:

Their builder is Levitt & Sons, a unit of the Levitt Corporation, which ran out of cash in October and declared bankruptcy in November. All work on this planned 460-home development for retirees, grandly named Seasons at Prince Creek West, has ceased. The Levitt employees were laid off, the subcontractors put down their tools, and the Costanzos found themselves in limbo.

The collapse of Levitt, the first big home builder to fail in the current slump, illustrates how the turmoil in real estate is spreading far beyond subprime borrowers who cannot pay their mortgages. Levitt had a fabled brand, decades of experience and enthusiastic customers with good credit, but none of that was enough to save it.

Paul S. Singerman, Levitt's bankruptcy lawyer, said that as the real estate market in Florida went into an absolutely unprecedented and catastrophic downturn, the builder's customers across the Southeast became victims. There is a bad story, an unfortunate story, about every customer that placed a deposit, Mr. Singerman said.

Seasons is less than a quarter finished. About 90 buyers have paid a total of $3.48 million in deposits for houses in varying stages of completion, ranging from all but done, like the Costanzos, to unadorned dirt.