Monday, June 17, 2013

Lot prices

"In recent years, builders have become accustomed to pay below true market value for finished lots. In some markets the finished lot prices fell to as low as 5% to 6% of home values. Builders and developers wrote down lot costs and were able to dispose of them at less than the cost to develop. Additionally, as the REO inventory grew, and many builders were acquiring lots from banks, not developers. Supply was plentiful and the holding cost of lots was comparatively low.
As recent activity has heated up, builders are challenged to control lots that they previously were reluctant to carry on their books. Developers and investors who opted to hold out through the downturn are now being rewarded for their patience. In many markets finished lots in prime locations account for 20% to 23% of finished home price. The price of lots in the same locations have jumped from $15k to $30k plus."

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