Builders again buying land

Two large home builders are increasing land acquisitions in the Triangle, a bet that the region's housing market and economy is poised for a rebound.

The recent activity comes after an extended period in which large builders refrained from making purchases as they waited for the housing market to bottom out and land prices to come down. With both of those things now occurring, builders see an opportunity to grab market share in an area whose long-term growth prospects have not been clouded by the recession.

"The biggest surprise has been how quickly the pursuit has ramped back up again," said Lee Bunn, Standard Pacific Home's land acquisition manager in the Triangle. "Just in, say, a 90-day period we've kind of gone from first gear to fourth gear."

Over the last month California-based Standard Pacific Homes, among the largest builders in the country, has paid nearly $10 million for 265 single-family and townhouse lots in Wake Forest, Durham, Raleigh and Cary.

Another national builder, Toll Brothers, recently paid $23.46 million for the majority of the Hasentree luxury golf course community in northern Wake County, a purchase that included the golf course and 318 lots.

The deals reflect the confidence builders have that the Triangle will continue to draw new residents and burn off the inventory of homes left over from the boom years. They are also a sign that builders believe lot prices have fallen far enough to reflect current market conditions.

The lot typically accounts for about 20 percent of the cost of a home, meaning the less a builder pays for dirt the more affordable it can make the house on top of it.

Publicly traded builders such as Toll Brothers and Standard Pacific are in a position to buy land partly because of a change in the tax code.

In November, Congress passed a law that lets companies that are losing money go back five years and get a refund for taxes paid when they were making money. Companies were previously limited to recouping taxes paid up to two years earlier.

"They're flush with cash," said Ed Dunnavant, who tracks Triangle housing trends for the research firm Metrostudy.

Land prices down

While builders such as Standard Pacific have plenty of cash, many local builders are struggling to stay afloat and need to sell some of their inventory. Other builders have already been foreclosed on by their banks, which are now in the process of disposing the lots. This has led to steadily declining lot prices in the Triangle.

The average lot price for a single-family home in the Triangle was $48,732 in the fourth quarter of 2009, down 19 percent from the same period in 2008, according to Market Opportunity Research Enterprises, a Rocky Mount group that tracks Triangle housing trends.

Bunn said the recent buying activity should not be confused with the frenzied buying that took place during the housing bubble.

"I think people are working on a smaller footprint," he said. "They're being more selective about where they go."

The Triangle still has a glut of developed lots left over from the boom years, but a number of those lots are located in outlying subdivisions that have become less attractive as housing closer to job centers has become more affordable.

'Feeding frenzy' small

In the more attractive areas of the Triangle competition for lots has become fierce. In southwestern Wake County, which includes Cary, Apex and Morrisville, the number of vacant developed lots totaled 4,331 in the fourth quarter, down 20 percent from the same period the year before, according to Metrostudy.

Bunn said Standard Pacific is poised to make a number of other land acquisitions in addition to its recent deals, which included buying 99 lots in the Mulberry Park townhouse community in Durham and 110 lots in the Northampton subdivision in Wake Forest.

Dunnavant said he expects land purchases to slow down as builders remain wary of carrying too much land on their books -- something that led to disastrous results when the housing bubble burst.

"If they do that they're going to be right back where they were three to four years ago," he said. "While there's a little bit of feeding frenzy right now I think it's really they're replenishing their war chest because most of them let their lot supplies dwindle," he said.

The Associated Press contributed to this report

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