Investors are banking on a strong housing recovery late in 2011 and early 2012. According to an Inman.com article, the supply of unfinished lots around the country are being snatched up because of the perceived upside to their current value.
According to the article, finished lots that were once being held by developers are being dumped back into the market with an extreme discount, some as much as 50 cents on the dollar. Builders or banks who took the lots due to loan defaults are now desperately trying to get them off the books.
America has seen a major influx of finished lots due to aggressive and liberal construction habits formed by builders and developers before the fall of the market. Now those same companies are dumping these lots back into the market and investors are snatching them up.
The investors buying up lots are getting an incredible deal. Cash is KING. Most of these lots are being acquired at prices below finishing costs, which will translate into no land costs in the end.
An interesting stat from the article points out that most major cities in the U.S. have a current 2-3 year lot supply. Once the market returns, builders will need to snatch lots quickly to meet housing demands, especially since they haven’t been buying land. It is the hopes of these lot investors that builders are willing to pay a premium.
It is estimated that there needs to be 1 to 2 million new units per year over the next 10 years to satisfy population growth. It is hypothesized that there will be pent-up demand due to a lack of construction during the down market.
If you have the cash, there are deals out there to be had.