Bank sales down significantly. When 60% of the land was being sold by banks, as was the case in early 2011, we advised our clients to buy aggressively in the better locations. Today banks represent only 6% of the residential land sales (as of 4th quarter 2014), and most of the bank activity is occurring in the Midwest and Southeast, or in exurban locations.
Developers selling again. Since housing market conditions began improving in late 2012 and early 2013, we have been watching the resurrection of developers who are selling lots and land to builders in the normal course of business. The lack of acquisition and development (A&D) financing has held back a stronger volume of developer sales. The developers’ share of sales will rise, as many of the nation’s top developers are backed by private equity now, and access to A&D financing has gradually improved in the last year.
Investors and long-term owners capitalize on current high land prices. As expected, the investors who bought land during the market correction are selling those assets to builders and developers. Long-term owners who are often not in the development business, such as farmers and family trusts, recognize that lot and land prices are back to or exceeding the prior peak in many metros and are anxious to sell. As shown in the chart below, finished lot prices have appreciated far faster from the trough in 2009 than most thought they would.
In summary, fortunes are usually made (or lost) by timing your land purchases right (or wrongly). Congratulations to our research subscribers and others who bought a lot of land in 2009 through 2012.
Jody Kahn leads our quarterly survey of residential land market conditions, in addition to our monthly builder survey. If you are a land broker or a home building executive who would like to participate in the survey in return for receiving the results, or are interested in learning more about our research, please contact Jody at email@example.com.