The Wall Street Journal reports on the financial troubles of several big builders and the new strategies others are adopting to push forward:

“The market is not deep enough or big enough to support all the builders,” said Alex Barron, a founder and analyst with the Housing Research Center, an independent research firm in El Paso, Texas. “There needs to be some consolidation. I don’t think that means [mergers or acquisitions]. I just think that means there has to be a shakeout.”

Mr. Barron declined to speculate about any specific companies. But two operators that other analysts are watching closely are Hovnanian Enterprises Inc. and Beazer Homes USA Inc. Some analysts believe both companies are running low on cash. Both companies have seen their stock prices decline nearly 60% so far this year—making them the sector’s biggest decliners—and both have traded below $2 a share…

Both Lennar Corp. and Toll Brothers, for example, are working out distressed real-estate loans, a move that is being cheered by many industry analysts. Toll, long known as the builder of suburban McMansions, has expanded into urban areas building condominiums, which continue to be some of its strongest performers.

Hovnanian’s strategy is to keep acquiring land lots and keep building a broad variety of homes. In the second quarter, it spent some $125 million of cash to purchase about 1,440 lots and to develop land.

I’ve wondered before if these new strategies might change the image of some of these builders who built many large suburban homes in recent years.

It would be interesting to consider what the housing industry would look like if a prolonged downturn forced these big builders out of business. Are there some regional builders who could then step into the gap? Would we have a return to smaller builders a la the pre-Levittown days?