Keep Your Land Development Operations

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 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!’

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. 

Read more of what Bill Lurz has to say on his blog, Ear to the Ground.