Builders
appear ready to deal on land againBy
Alex Veiga The
Arizona Republic 11.07.09
LOS
ANGELES - The housing bust left homebuilders with plenty of
red ink on their books as they walked away from swaths of land
they no longer needed.
But
now homebuilders are on the hunt, vying for choice parcels
even in foreclosure-riddled markets, such as
Las Vegas
, Southern California and
Orlando
, where prices are cheap and there are signs of recovery.
While
not a full-blown land rush, experts point to a surge in land
deals since early summer as home sales and prices began to
stabilize. For the better lots, the competition is fueling
bids well above the asking price.
"In
the past, (builders) had really been the ones that had been
feeding the market and selling lots to investors," said
Tom Dallape, a principal at the Hoffman Co., a land-brokerage
firm based in Irvine, Calif. "Now, all of a sudden, they
are rushing back in."
Major
players such as Ryland Group Inc. and Scottsdale-based
Meritage Homes Corp. are among those that jumped into the
fray.
Meritage
recently signed contracts to buy 2,500 lots spread out over
new communities in several states, including
California
. The builder plans to open nine new communities this year or
early next.
This
summer, Ryland bought land or signed option contracts to do so
in markets including
Indianapolis
,
Atlanta
,
Houston
,
Las Vegas
and
Baltimore
.
Of
course, not all builders are looking to expand their land
stockpile.
Pulte
Homes Inc., for example, has been more conservative. The
builder added thousands of acres to its land holdings when it
acquired rival Centex Corp. in August.
"We're
not one of those who need land," said Richard Dugas,
Pulte's CEO.
The
timing of these land deals could also be risky.
"The
stability we've seen has been nice, but it hasn't been for
long, only five or six months," said Megan McGrath, an
analyst with Barclays Capital. "There is certainly some
risk that if the market tails off again or we start to see
cancellations pick up, some of those deals that previously
penciled may not pencil anymore."
Still,
with new-home sales up 22 percent this year, builders have
grown more confident in estimating what they should pay for
land and expect to profit after construction costs.
For more
information about Lillian Wong & Associates and our services, please visit
my website at LillianWong.net or email me at
Lillian@LillianWong.com.
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