This is from the AP. I don’t know quite how to take this. All my research seems to point in the exact opposite direction. The developers I know are hard pressed for cash and not in position to develop anything. I have to grant that my sample of the economy is very small and does not represent the whole. Given that I think we are no where near the bottom of this correction I personally think it is premature to be developing land just yet. Now buying might be good that too has problems. Raw land doesn’t produce income it only drains income. My comments are in bold.
Builders start snapping up cheap land
Associated Press
LOS ANGELES — The housing bust left home builders with plenty of red ink on their books as they walked away from swaths of land they no longer needed.
But now home builders are on the hunt again, vying for choice parcels even in foreclosure-riddled markets like Las Vegas, Southern California and Orlando, Fla., where prices are cheap and there are signs of a recovery. What signs of recovery? There are still huge numbers of REO (bank owned property) homes not on the market yet. There are tens of thousands of homes waiting to be foreclosed yet to hit the market.
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. Starting another bubble? Where is the financing coming from? Right now it is easier to pull healthy teeth with a pair of pliers than get a mortgage closed.
“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 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. There isn’t any building in Everett. Any homes for sale in Everett are only existing homes.
This summer, Ryland bought land or signed option contracts to do so in several 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.
And roughly half of those parcels are already primed for construction.
“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. Now they bring in a reasonable doubt. Where are the buyers going to come from when nobody has a job?
“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.”
This article effects every builder that has homes for sale in Everett.
