Builders bail as Valley market slumps - East Valley Tribune: Business

Builders bail as Valley market slumps

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Posted: Saturday, November 24, 2007 2:33 am | Updated: 6:08 pm, Fri Oct 7, 2011.

National homebuilders are selling off thousands of acres of land across the Valley — often at a loss — to stem the bleeding from stagnating sales and appease stockholders.

Builders started grabbing huge chunks of land at a feverish pace in 2001, especially in peripheral areas such as Maricopa and Casa Grande, said John Fioramonti, senior managing director at Meyers Builder Advisors in Scottsdale.

When the market slowed, they faced declining sales and increasing contract cancellation rates and needed cash to help improve their balance sheets. Instead, they were left with huge inventories of land on which they couldn’t build. That affected their net worth and therefore their stock prices, Fioramonti said.

“That stock value is the end number everybody looks at,” he said.

Now private regional builders and investors are snapping up the excess lots for 40 percent to 50 percent of the values they were worth two years ago in some cases, Fioramonti said.

A local developer recently bought 887 home sites in Casa Grande for $7.1 million from Ryland Homes, which had purchased the land from that same developer for more than $19 million just last year, he said.

Also in Casa Grande, Scotts-dale-based The Wolff Co. and Gilbert’s Langley Properties purchased more than 6,800 acres of land, which could hold 23,000 homes, from D.R. Horton for $70 million.

The investors plan to sell the land back to builders when the market corrects, said Tim Wolff, co-president of The Wolff Co. The partnership is looking to invest up to $500 million in land purchases in Arizona and other western states over the next couple of years.

“We have a belief that the market will recover,” Wolff said.

California-based builder John Laing Homes also is positive about the Valley’s long-term prospects. The Newport Beach company jumped into the local market in April.

Division President David Walls said he’s been receiving several calls a week from land brokers and bankers with news of properties for sale.

In September, the builder bought 136 home lots in a master-planned community in the West Valley from Tempe-based SunCor Development. But Walls said he isn’t in a hurry to buy more just yet.

“We’re spending lots of time gathering data and trying to make sure we’ve got our arms around the market,” he said.

Builders and investors face the same uncertainties as potential home buyers, Walls said. The market’s under a lot of stress, and they don’t want to buy land if the price is going to drop again, he said.

“(Investors are) sitting on tons of money, waiting for what they feel is the reasonable prediction that this is the bottom,” Fioramonti said.

In some outlying areas, there likely won’t be another big development push for at least five years, but investors don’t mind holding on to the land and are readying for the next upswing, Fioramonti said.

“Phoenix is going to come back,” he said. “Its fundamentals are too strong not to.”

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