Lennar admits drywall problems, but it's only a drop in the bucket

In an SEC filing Friday, Lennar (LEN) admitted that it has identified 400 Florida homes that have problems with defective Chinese drywall and has set aside $39.8 million to fix the problem. But that's only a drop in the bucket of homes built in the U.S. between 2004 and 2008 that might be affected.

Ultimately we could find that as many as 100,000 homes have the problem. Given the financial state of most builders, this could hit the bottom line very hard, which may be why the CPSC is moving so slowly on this issue. The AP reported in April that enough Chinese dry wall was imported to build about 100,000 homes. People in warm, humid climates will be the first to notice the effects of the defective drywall, but homes in northern climates could be impacted in several years.
The Consumer Product Safety Commission reported that it has received more than 600 complaints from 21 states and the District of Columbia. Most of the reports are from Florida, Louisiana and Virginia. People who have noticed the problem get an odor of "rotten eggs," which has been tied to sulfur fumes. These fumes have been associated with respiratory and sinus problems. In addition to the odors, the drywall also causes metals, such as air conditioning coils, to erode.

In testing the drywall the CPSC has found that Chinese samples include a key chemical not in U.S. drywall samples, strontium sulfide, which causes the rotten eggs odor. Other toxic chemicals found in higher levels in the Chinese drywall include hydrogen sulfide, carbonyl sulfide and carbon disulfide. All three are potentially toxic and carbon disulfide in a liquid form is known to be flammable.

Lennar says it has not found Chinese drywall in homes built outside of Florida. Shouldn't the company know where it bought and used Chinese drywall? Is this just an attempt to contain rather than fix the problem?

If your home was build between 2004 and 2008, your builder may have used Chinese drywall. The AP reports that 540 million pounds of Chinese drywall entered the U.S. in 2006 alone, which is enough for 34,000 homes. The dry wall shortage was created after the 2006 hurricanes when so many homes needed to be repaired or rebuilt. You can find out more about the drywall investigation at CPSC's special website. The CPSC is working with the EPA, CDC and the Agency for Toxic Substances and Disease Registry to look at the health impacts of Chinese drywall and find out what is causing the emissions.

You can be sure to avoid the problem entirely by contracting your new home with eco-friendly Ecorock. Prsident Obama mentioned this alternative in his energy and technology briefing on the FY2010 budget.

Lita Epstein has written more than 25 books including
"The 250 Question You Should Ask Before Buying a Foreclosure."

Increase your money and finance knowledge from home

Investment Strategies

What's your investing game plan?

View Course »

Investing in Emerging Markets

Learn to invest in a globalized world.

View Course »

Add a Comment

*0 / 3000 Character Maximum