Builders Go Shopping for Land; Some More Cautious

It’s taken sometime, but recently, the Inland Empire has been a hot spot for builders buying up land at low prices. This is the first time in more than 3 years builders have been actively shopping for land to build future communities. The landscape of these communities is not determined yet, but speculation is for more affordable homes, at lower price points.

The area’s that have been most focused on for future homes to be built is in the employment areas along the 15 freeway, and 91 freeway.  Most notably, Corona Valley or Eastvale,  Lake Elsinore, Temecula, and Rancho Cucamonga. Builders have gained optimism about the ability of the market to rebound following 4 months of increasing homes sales reports, and record low rates.

Lennar, Standard Pacific, and Beazer are among the first builders to start buying up finished lots for future building. According to Jeff Meyers of Meyers Builder Advisors said that their Eastvale lots, they received 30 offers, including 10 above asking price of $105,000 per lot. Standard Pacific eventually won out the other bidders, for an undisclosed sum.

Some builders are a bit more cautious about the future of the market. Van Daele Development views the buying of land at the current prices as risky. Mike Van Daele, CEO of Van Daele Development, estimates that home prices would have to rise 10% in the next 18 months for an acceptable return. He views the Inland Empire as too risky to start buying land, due to the high unemployment rate. Orange County is a more stable are in his view. They plan on building 3 new communities in Orange County in the next year.

Future uncertainties, including the potential “next shoe” to drop, a second wave of foreclosures, and rising joblessness, make it too early to call said Randall Lewis, vice president of Lewis Operating Company, a major land developer of the Inland Empire real estate.  Lewis did state, he has received many call from developer wanting to purchase “ready to build lots” for 2010/2011 completions. Though Lewis Operating Cos., will not be invest in the development of its raw land until home prices rise.

[Source: Press Enterprise]