In a typical real estate cycle, homebuilders buy land when it's cheap, develop homes as the market heats up and then make big bucks selling them during a boom before starting all over.

But this is no typical cycle.

During the biggest real estate crash in decades, local homebuilders KB Home and Ryland Group Inc., and others are going into virtual hibernation. They're slashing jobs, closing offices and unloading inventory on the cheap while shying away from picking up land even at its lowest prices in years.

These measures are translating into surprisingly good cash flow for the companies and may prove to be the ticket to survival in an industry that has seen scores of homebuilders close shop. But at least one analyst frames the general strategy more harshly, even as he applauds it.

"In a sense, they are slowly liquidating the company," said Fox-Pitt Kelton analyst Robert Stevenson, who covers Westwood-based KB Home and Ryland of Calabasas, and doesn't think they are going out of business.

Tough words to be sure, but the housing market has been even tougher. First crimped by the credit crunch two years ago, home sales are now being hit hard by rising unemployment and a deepening recession that has continued to force homeowners into foreclosure and lower prices.

Last week, the federal government released figures showing housing prices declined 8 percent in November, the largest drop since those records began being kept in 1991. That's left the national median at just $181,000 in November, about 20 percent off its peak and the bust has been far worse in boom markets such as Los Angeles County.

That has forced homebuilders to try and compete in a market filled with dirt cheap foreclosed homes that in many cases have been occupied for less than a year. Earlier this month, John Laing Homes of Irvine said that it was cutting jobs and looking to raise billions of dollars. And veteran builder Barratt American Inc. of Carlsbad filed for Chapter 11 bankruptcy protection Dec. 24.

KB Home, the nation's fifth largest homebuilder, and Ryland, the 11th largest, have not been immune, recording losses in the hundreds of millions of dollars in their last quarterly reports a huge change from record earnings of just a few years ago. That has been reflected in their stock prices, both of which traded at a fraction of highs that topped $80 in 2005.

For reprint and licensing requests for this article, CLICK HERE.