Land Bidding Wars Happening Now

Posted on April 26 By Justin McHood

In many areas of the country, home values are falling, foreclosures are rising -- and builders are getting in bidding wars for land.

One such area is the Phoenix metro area - and there are others in the country just like it. From the Wall Street Journal:

Builders are particularly interested in finished lots, land with improvements such as sewers and streets in place. That allows for homes to be constructed quickly. The companies are also focusing on suburban locations within easy commuting distances of city centers and employment hubs.

Those factors were all in play in Gilbert, where Pulte this month beat out the other bidders to purchase 88 lots from an investor group. The price was reportedly about $5.7 million. Pulte, the nation's largest builder, aims to start building model homes in the community, named Lyon's Gate, this fall, the company said.

The recent deal was the builder's second purchase there in recent months: It acquired 107 lots nearby for an undisclosed price in October.

Nationally, finished-lot prices, which saw low-single digit increases in the first quarter, are up nearly 20% from the trough, largely considered early 2009, according to a land survey released this week by housing-research firm Zelman & Associates. Lot prices in Phoenix and Southern California's Inland Empire have soared more than 60%. Sacramento, Orlando and Los Angeles are up between 30% and 40%.

Even in areas where real estate values are falling, it is possible to see the price of lots increase -- possibly even dramatically. How dramatically? How about double?

Nationally, the best-located lots are commanding double what they would have a year earlier, said Greg Vogel, chief executive of Land Advisors Organization, a national land brokerage firm based in Scottsdale, Ariz.

"We're talking about a significant turn here," said Jim McNeil, chairman of law firm Akerman Senterfitt's national residential development practice that represents several public and private builders. "The builders think this thing has turned and they're making sizeable investments in both finished lots and raw land."

If lot prices are going up and builders are building on them... one thing is clear: builders see a turnaround in the future.

But how far out in the future is still somewhat unclear.

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