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Nov. 07, 2009
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REAL ESTATE: Homebuilders hunt for land

Las Vegas one of areas with falling prices

By HUBBLE SMITH
LAS VEGAS REVIEW-JOURNAL
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The housing bust left homebuilders with plenty of red ink on their books as they walked away from swaths of land they no longer needed.

But now homebuilders are on the hunt again, vying for choice parcels even in foreclosure-riddled markets such as Las Vegas, Southern California and Orlando, Fla., where prices are cheap and there are early signs of a recovery.

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    • While experts don't see a full-blown land rush, they notice 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.

    It was primarily investors buying lots in Las Vegas for the past two to three years, said Michael Stuart, senior vice president of land for Colliers International in Las Vegas. Since August, major builders such as KB Home, Richmond American and Harmony have "jumped back in the game," he said.

    "Raw land is still pretty much dead," Stuart said. "Everybody realizes that nobody is producing finished lots. By the end of next year, we're going to be out of finished lots or close to it."

    He represented Kimball Hill Homes, which filed for bankruptcy last year, in the recent sale of about 1,100 lots in Las Vegas to Irvine, Calif.-based SunCal Cos. for more than $20 million.

    Most of the lots were in the master-planned communities of Providence, Mountain's Edge, Green Valley and Southern Highlands. Kimball Hill has cleared out most of its Las Vegas portfolio and reduced its staff from 1,600 employees to about 10, he said.

    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.

    This summer, Ryland bought land or signed option contracts to do so in several markets, including Indianapolis, Atlanta, Houston, Las Vegas and Baltimore.

    "We are pursuing more deals than at any time in the past several years," said CEO Larry Nicholson.

    Dennis Smith, president of Las Vegas-based Home Builders Research, said he's seen a flurry of activity from both builders and investors purchasing residential lots in Las Vegas. He reported more than 17,000 finished lots in the metropolitan area, including about 2,500 available for purchase.

    Not all builders are looking to expand their land stockpile.

    Pulte Homes, 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.

    Before it was acquired by Pulte, Centex let the option expire on an agreement to purchase about 2,200 acres owned by LandWell Co. in Henderson. The land, former site of a World War II chemical manufacturing plant, was in escrow for two years while the soil was being tested and analyzed.

    "In the past (builders) had really been the ones that had been feeding the market and selling lots to investors," said Tom Dallape, principal at Hoffman Co., a land brokerage firm also based in Irvine. "Now all of a sudden they are rushing back in."

    The timing of these land deals could also be risky.

    "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."

    Still, with new home sales up 22 percent this year, builders have grown more confident in their ability to estimate what they should pay for land and expect to profit after construction costs.

    Land is changing hands in Las Vegas at a faster pace than anytime in the past three years and prices are inching upward, said Aman Lal, who recently opened an office for Hoffman in Las Vegas.

    That's a strong signal the city's housing market has hit bottom and is starting to recover, he said.

    "There is a big misconception out there that the land market in Las Vegas is dead and all the homebuilders have gone away," Lal said. "In fact, what's happening now is just the opposite. The supply of finished lots is diminishing rapidly and builders are clamoring to snap up what's left so they won't be forced to buy raw land."

    Builders are primarily looking for land in areas that are already cleared for home construction. That way, they will be ready to build and sell in just a few months.

    The Associated Press contributed to this report.

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    h.a.h. wrote on November 09, 2009 08:37 AM: @ yes......

    how does a 6500 credit for existing home owners do any good for the ppl who are UNDERWATER? i couldn't qualify for another mortgage, nor would i want one, and i would never be able to sell my house , probably won't be able to for 10 or 15 years. please explain how this helps me , and the millions like me.


    jm0405 wrote on November 07, 2009 08:58 PM: Why build more homes or even entertain that thought when there is already 1000s of foreclosed/empty homes all over Vegas? Same with commercial buildings. We need to use what we already have. Besides, there are no jobs for new people moving to town - nobody's hiring - so who can buy? No news jobs proposed, no new hotels or schools being built - so who's going to buy the houses? Japan or China?


    YES wrote on November 07, 2009 08:53 PM: guru- included with the bill that was passed extending the credit (by the way it is not just for 1st time buyers, hasnt been, but for those who have not owned a home for the last 3 years) BUT!!!!...guess what pessimist...it also includes upto $6500 for buyers who have currently own a home and who have been in their home for 5 out of the past 8 years....so that kind of eliminates all the "investors" and "flippers" that bought when prices skyrocketed hoping to make big bucks...a little too late...just puttin that out there for those who are so quick to think that other are not helped as well...;-)


    yes wrote on November 07, 2009 08:51 PM: guru- included with the bill that was passed extending the credit (by the way it is not just for 1st time buyers, hasnt been, but for those who have not owned a home for the last 3 years) BUT!!!!...guess what pessimist...it also includes upto $6500 for buyers who have currently own a home and who have been in their home for 5 out of the past 8 years....just puttin that out there for those who are so quick to think that other are not helped as well...;-)


    Stop It All wrote on November 07, 2009 06:47 PM: It's beyond time to put a halt to unrestrained growth in the Las Vegas valley. Where is the water to support all these new homes going to come from...Mulroy's plan to suck rural Nevada dry? Obviously, no one is going to care until, as this decade old drought continues, Lake Mead drops to levels well below the "danger" zone. Building $2 - $3.5 billion dollar pipelines to suck the groundwater out of our rural neighbors is not going to provide enough water to support the already over 2 million in this county, let alone any new growth.


    h.a.h wrote on November 07, 2009 06:28 PM: i too am wondering why there is help for everyone except those of us who did and continue to do the right thing. i amd over 200 grand underwater on my mortgage , i guess i'm a stupid idiot to keep paying the mortgage on time every month. i hear stories about walking away, like it's a no brainer. but what is the real consequence of it. i could care less if my perfect credit takes a hit because what does that really mean anymore, but i highly doubt it's a simple as just saying "screw it" and leaving . this is a recourse state , so the lenders can come after you. i guess i should just stop paying my mortgage and then perhaps i could qualify for some assistance. believe me, i don't feel entitled but if the people who are not doing the right thing are being rewarded, and the first time homebuyers are being rewarded, i guess i'm feeling a little left out.


    sharon wrote on November 07, 2009 04:12 PM: Keep the Change and stop spending. Why is it we never hear about cuts to the budget?
    They just keep borrowing and spending.
    Enough.


    guru wrote on November 07, 2009 12:56 PM: To me, it makes no sense to give a benefit to first-time home buyer, when there are existing home ownwers who are stuggling and lost money. I say help those who LOST MONEY first! I know NAR (realtors) was lobbying for an extension of the 'buyer" credit, which is clearly for their own self interest. Politicians do not seem to do things right.


    Ross Wolf wrote on November 07, 2009 11:43 AM: Obama recently extended the First Time Home Buyer Tax Credit to help sell homes and to create jobs:

    In contrast, Forced health insurance costs will disqualify millions of middle class homebuyers qualifying for mortgages. Home buyers that do not qualify for Gov. assistance to buy health insurance, will either have to offer lower prices for homes or Opt-Out buying health insurance to eliminate that debt, to qualify for mortgages. At stake, middle class home buyers support trillions in mortgages held by U.S. banks. Banks—already hold millions of defaulted mortgages. Disqualifying middle class home buyers may lower home selling prices erasing benefits of the First Time Home Buyer Tax Credit. Generally declining or stagnate home prices have caused job loss in construction and manufacturing. Current falling home prices continue to lower property taxes, forcing local governments to layoff workers and ask federal agencies for money; increasing federal deficits.


    yes wrote on November 07, 2009 10:42 AM: there is a lot of land out there that is fully developed and ready to built on NOW that smaller builders walked away from...we just bought some actually. bottom line I have been in this industry for 15 years here in vegas, and if you guys dont see that real estate IS the way for us to get out of the slump...u are deceived. and for those who did not read the fine print, if there were any. ure house payment was 3K a month when you bought it 5 years ago...why are u mad it is 3k now? (and to those of u how did interest only 5 years ago, when fixed rates were at 5, shame on you) STILL does not give anyone the right to destroy a home, unless u paid cash, IT WAS NOT URES TO DESTROY!!! and if u did pay cash, there would be no reason to destroy it. Sorry, i have no sympathy for those who were so easily swayed...lets get this back to what it should be a STABLE market.


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