Archive for April, 2013

WJS: U.S. Land Gets More Expensive

Thursday, April 11th, 2013

A recent article in the Wall Street Journal about the value of land in the United States quickly made the rounds of the Twitter and the Blogosphere. Here are some some telling excerpts about the changing value of vacant land from:

Wall Street Journal Property Report: U.S. Land Gets More Expensive

By Robbie Whelan | April 9, 2013

“The world has just woken up and said, ‘We need land!’ ”

Land values across the U.S. rose on average 13% in 2012, the first annual gain since 2005, according to estimates in a March report by Zelman & Associates, a housing consultancy. The increase was fueled primarily by growing demand among builders for finished lots, or ready-to-build home sites with roads, sewage lines, electrical-power hookups and other infrastructure in place.

“There’s no question the land market has gotten heated of late,” said Richard Dugas, chief executive of PulteGroup Inc., the nation’s second-largest home builder by volume, . . . “In some markets it’s a real challenge to get land deals to pencil.”

For consumers, costlier land means more-expensive houses. Land cost constitutes 21.7% of the final sale price of a new home, according to the National Association of Home Builders. As land prices rise, builders tend to pass 100% of those costs on to consumers.

To be sure, land prices nationally are still far from the peak levels reached in 2005 and 2006.

Meanwhile, with the inventory of finished lots dwindling, investors are beginning to bid up raw land, as well. A recent survey by Zelman showed that demand for raw land has grown in each of the past five fiscal quarters.

Justin Good, a land broker . . . , points to a parcel of raw land that sold in April 2012 for $235,000 per acre. Now, builders are making offers more than 35% higher than that price on an adjacent piece of raw land. “That’s staggering,” Mr. Good said.

 

See the original article here at Wall Street Journal Online, or the easy to read online.wjs.com print version. Read all of Robbie Whelan’s excellent Wall Street Journal Real Estate and Property articles at his WSJ archive.

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