Friday, December 7, 2007

Builders Are Liquidating Land At Huge Discounts

From The Wall Street Journal:

“What's happening in Phoenix has begun to play out across the U.S. in recent weeks. Public home builders and land developers, who dominated the market during the boom, are bloated with land and need to sell, partly to record losses to recoup taxes. Meanwhile, more nimble private builders and opportunistic investors are raising money and starting to snap up the pieces, buying parcels for as much as 60% discounts.

‘It's a great time to be looking for land in Phoenix,’ says John Fioramonti , senior managing director at Myers Builder Advisor, a real-estate consulting firm based in Scottsdale, Ariz. ‘The national builders are just in a panic to get rid of excess inventory.’

The land deals in Phoenix and elsewhere are a vivid reminder that even when housing markets are scraping bottom, investors are willing to buy land if the price falls low enough.”

From Financial Times:

“It makes sense for builders to consider liquidity-boosting options while they are available. There is no shortage of investors looking to snap up land when the price is right. Home builders may end up selling at excessive discounts but their losses could be even worse if they wait and the housing slump gets worse. Property values are still sinking, and builders are expected to take further impairments on land and housing stock in the fourth quarter.”

From CNN Money:

The decline in the value of builders' land and home inventory was further demonstrated a week ago when Lennar the No. 1 home builder by revenue, reported that it was selling 11,000 properties, including some completed homes, to the real estate arm of Wall Street firm Morgan Stanley for only 40 percent of its previously stated value.”

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