Buying Spree: Discounted Land Prices, Long-term Real Estate Potential Are Attracting Developers
RISMEDIA, May 14, 2010 -- "Residential developers and homebuilders who survived the housing bust now are feasting on the remains of those who didn’t. They’ve been on a buying spree, using cash savings to acquire finished, but unbuilt lots and subdivisions that have been stalled or lost to foreclosure or bankruptcy. They’re paying up to 75 percent off peak land prices during the housing boom, and planning to succeed where others have struggled or failed.
All say discounted land prices attracted them, but it was the local housing market’s long-term potential that made them buy."
HT: John Jarrard
4 Comments:
In most cases, the price they are paying is under what the cost would be for permitting and improvements (streets, utilities). You simply cannot improve land for what it is selling for currently, so it's a simple waiting game until demand returns.
Cash doesn't talk these days, it yells. Those that can pay cash are getting phenomenal discounts as banks, straddled with holding costs and orders to liquidate, are scrambling to find buyers.
It's only a matter of time until there's a shortage of developed land in many communities. Simple economics -- if something's priced under the replacement cost, a shortage will eventually develop and prices will increase to match (or exceed) replacement cost.
Gotcha
The gotcha here is the local government deficit. California is now going the way of Greece. More and more localities will be raising property taxes. But when it finally breaks open again after 9 years real-estate will be your safest investment if and only if you put your pennies into Alaska, the only state people want to move into as the globe overheats. Go North young people and grow cool with your country!
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BYOB, Bring Your OwnIce Bricks
Party touched on it. It municipal debt that is missing in the equation for recovery. Local governments borrowed to build infrastructureto support the rapid growth over thpast te years, assuming future increased tax revenue would more than offset the borrowing costs.
Is there a major market that doesn't have a ton of land that is ready for houses. And this makes long term land virtually free. There won't be any public money for new services until the serviced land is absorbed. My opinion: 10 years in the markets that were hit the hardest.
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My opinion: 10 years in the markets that were hit the hardest.
5/16/2010 10:05 PM
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I had a strong inclination to put 10 years but was tempted by the single digit 9 which was easier to type. Do real estate prices follow an Elliott wave of one human generation? 26 years? These one generation sine or cosine fluctuations are modified by so many unpredictable wars, famines, earthquakes, volcanic eruptions, and oil slicks that they are hard to nail down. I still like 10. Why we can't use hexadecimal? Then we could say, "in A years"
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