Residential land is one of the real estate product types that has continued trading hands during the Great Recession. But two teams of land brokers have decidedly different opinions about what land sales mean in this economy, especially in the short term.
On one hand, some home builders have been able to pick up distressed lots — including many finished, entitled ones — at the expense of other builders that could not withstand the economic pressures.
On the other hand, land bankers or investors are picking up land for far less than it was selling for a few years ago. The investors appear to be buying on the Valley’s outskirts, in areas such as northern Pinal County. Builders, however, are looking closer in for property.
Among the builders taking advantage of the reset in prices are Scottsdale-based 
“Pulte is sitting on $1 billion in cash,” said Ramey Peru, senior associate of the land source group at
Meritage turned a profit during the first quarter of 2010, and that’s after snapping up hundreds of lots since summer 2008.
“I think the most compelling story here is that builders are back in the market, and they’re selling homes,” said John Finnegan, senior vice president of Colliers.
But that doesn’t mean Finnegan thinks all is well.
The number of sales sparked by the federal tax credits for first-time home buyers may not be as significant as once thought. Of greater concern, he said, is what happens now that those tax credits are no longer available, and who is selling homes right now?
“That’s what everybody wants to know,” Finnegan said.
If global financial conditions continue to deteriorate, that could have a devastating impact on housing, experts say.
“There’s trepidation on Wall Street about the problems in Europe,” said Chaz Smith, senior vice president of Colliers.
If consumer spending takes a turn for the worse, that could mean a return to essential spending and forgoing home purchases, he said.
Ross Smith, senior vice president of the land group at
“We’re seeing buyers return,” he said.
Although there will be some pullback among consumers as a result of the tax credit expiration April 30, he doesn’t expect it to last long.
He’s also upbeat about the prospects for job growth. He pointed to the news released May 18 by the Arizona Department of Commerce that 19,500 jobs were added in the state in April.
“I don’t expect a sharp drop-off in new home sales,” said Ross Smith. “Activity may flatten out for a while, but the rising tide of an improving economy should boost activity later this year.”
Pricing for consumers should reflect the new basis for lot acquisition.
“Lower lot prices will help the builders offer lower-cost homes, and they have also redesigned their homes to make them less costly to build,” Smith said. “The primary factor in pricing their homes, however, is the low cost of relatively new homes that have been foreclosed on and have come back to the market at lower prices. Builders generally can sell new homes for 20 percent to 25 percent more than such competition.”
For now, the strongest markets for lots are Gilbert, Chandler and Surprise. Despite its far-flung location in the West Valley, Buckeye also has seen some robust activity.
As for Pinal County, “the buyers there have been investors who are picking up lots for very low prices,” said Ross Smith.
Those lots on the Valley’s fringes are trading for one-third less than at peak pricing three or four years ago, he said. But the bottom is likely to have been reached in areas closer in.
“In the interior, with Chand-ler and Gilbert at the bull’s-eye, those prices may have dropped by a third a year or two ago, but have headed back up in the last six or eight months,” said Ross Smith. “Builders are competing with each other to buy in those areas.”
Though many finished lots have traded hands in the past 24 months, there are still deals to be had, he said.
“We are seeing land buyers returning to the market with a sense of urgency that has not been evident for a couple of years,” he said.
Home builders
A look at those no longer operating in the Valley:
• Atreus Homes
• Brown Family Homes
• Cambria Homes
• Charlevoix Homes
• Cornerstone Homes
• Element Homes
• Elite Homes
• Engle Homes
• Hacienda Builders
• Jackson Properties
• John Laing Homes
• Montalbano Homes
• New Sun Homes
• Orleans Homes
• Randall Martin Homes
• Santa Anna Homes
• Stratland Homes
• Zacher Homes
Home builders in distress:
- Fulton Homes: Operating under Chapter 11 bankruptcy protection
- Trend Homes: Filed for Chapter 11 bankruptcy and was purchased by private equity firm
- Najafi Cos.
- Woodside Homes: Emerged from Chapter 11 reorganization
Larger or new home builders with local operations or communities:
• Ashton Woods
• Beazer Homes
• Blandford Homes
• Cachet homes
• Canterra Homes
• D.R. Horton
• Elliott Homes
• Joseph Carl Homes
• K.B. Home
• K. Hovnanian Homes
• Lennar Homes
• Maracay Homes
• Meritage Homes
• MPC Homes
• Pinnacle West Homes
• Pulte Homes
• Richmond American
• Ryland Homes
• Scott Communities
• Standard Pacific
• Taylor Morrison
• T.W. Lewis
• Weststone Communities
• William Lyon Homes
Largest residential land transactions in Maricopa County since 2008, by dollar amount:
Sale amount: $16.8 million
Location: Surprise
Buyer: Taylor Morrison Homes
Sale amount: $11.6 million
Location: Peoria
Buyer: Pulte Homes
Sale amount: $11.1 million
Location: Buckeye
Buyer: Quantum Capital
Sale amount: $11 million
Location: Buckeye
Buyer: Paulson RERF
Sale amount: $9.3 million
Location: Surprise
Buyer: DBSI
Sale amount: $9 million
Location: Gilbert
Buyer: Richmond American
Sale amount: $8.8 million
Location: Buckeye
Buyer: Petrus Partners/Voyager Investments
Sale amount: $8.2 million
Location: Scottsdale
Buyer: EP Real Holdings LLC
Sale amount: $6 million
Location: Goodyear
Buyer: Joseph Carl Homes
Sale amount: $5.7 million
Location: Gilbert
Buyer: Pulte Homes
Sources: Colliers International and Phoenix Business Journal research
Posts
