Housing Giants - March 15, 2009 - (Page 3) vieWpoint By Bill Lurz, Senior Editor, Business Keep Your Land deveLopment operations Not everyone has stopped developing land, Bill reports in his blog, Ear to the Ground. The more I see of what I’d call “stirrings” in the marketplace, the more convinced I am that builders ought to retain their land development operating capability, even if it’s dormant right now because they can buy serviced lots practically anywhere for less than it costs to develop. Chicago builder Jamie Bigelow told me recently that despite the risk associated with land, he will continue to develop land in the Chicago market and in Texas. He believes there will be good margin points available for those builders who stay in the development business rather than those who are just buying the cheap lots that now flood the market when the market comes back. That means he’s looking at land now in Chicago, because it still takes three years to get entitlements in that market. Pat Neal of Neal Communities in Bradenton, Fla., says he’s also not giving up on land development because “it’s an integral part of our value proposition that our communities are designed and built as a unified whole.” Neal insists on controlling the look, image of quality and environmental integrity of his communities. “You can say I’m anal about that, because it’s true,” he laughs. What I draw from this is that, while i bet the ones who continue to develop will be sitting pretty three years from now when all the cheap lots are gone. many builders will give up developing because so many cheap lots are available, some won’t — and I bet the ones who continue to develop will be sitting pretty three years from now when all the cheap lots are gone. Charles Sheron of The Sheron Group, who develops in Atlanta and various areas of Florida, says that even though builders can buy lots in those markets for less than development costs and with very soft terms, “How long can you count on that when the market comes back?” Lee Wetherington, a prominent move-up builder in Sarasota, Fla., told me recently he’s done developing land for the next 10 years — “And by then, I’ll be retired!’ But, Sheron counters, “Lee may think he doesn’t need to develop for 10 years, but it’s dicey to predict beyond the next three!” For some reason, maybe just my notorious optimism, I’m starting to get the feeling recovery may not be as slow as most people think. HG Video editorial Bill has a topic for your next HBA meeting: link impact fees to an increase in density for a win-win situation. 03 03.15.09 HOUSING GIANTS www.HousingGiants.com http://www.housingzone.com/blog/1360000536.html http://www.sherongroup.com http://www.nealcommunities.com http://www.HousingGiants.com
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