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It is not time to fall in love with Land Again

Thank you Broyce Thompson

Broyve is the  editorial director of the BUILDER group of magazines published by Hanley Wood, LLC.

It's No Time to Fall in Love with Land Again  Word is filtering in from markets throughout the country: The biggest builders are paying too much for finished lots. Critics, mostly the private builders who bid too low, worry that this could lead to another cycle of home price over-heating, with calamitous results if builders fail to sell homes.Many builders who are buying these lots, though, are close to running out of land on which to build. Others want to prepare for a likely rebound in the housing market later in the year. How much will finished lots command then? The problem is that builders who pay too much for land now probably won't have the benefit of rising house prices later in the year that could bail them out of a bad transactions. A glut of resales and foreclosures is likely to keep a lid on home prices throughout the year.This is a dangerous time for builders that managed to survive the downturn. It's a mistake to try to re-coup profits too quickly. If the market falters, companies that over-extend will be hard-pressed to find the cash to sustain operations. A measured approach is what's called for.Dirt may still decline in value. Many banks still haven't liquidated their lots, notes Chuck Shinn, the esteemed consultant from Littleton, Co. "This not the time to start stockpiling lots....In past cycles lots held their value until the end and then the bottom dropped out."  We're entering a new era that will benefit the strongest operators, the builders who have firm control over costs and processes, the builders who know how to create real value for buyers, in energy-efficient homes and desirable communities. That discipline must extend to land acquisition as well. Buying land is the biggest risk that private, or public, companies take. Make triple sure that each deal really works. Better yet, try to get someone else to hold the bag. ·                                            Posted By: bthompson (Bio) at 11:19 AM

 

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