The Race Continues: Economic Growth vs. An Economic Tantrum-Week 14

Land Market Summary by Segment:

Residential Land – Is The Market Building a Bubble?

In the land market deal flow that we see, the supply of residential lots in the most active market segments is severely constrained. The forces constraining them include the three years it takes to get a tract of land rezoned and approved for residential development plus another year to actually build the infrastructure. As a result, land developers have to look four years in the future to forecast what they can afford to pay today for a tract of land if they want to create a residential community.

Currently, home builders are extremely concerned about lot availability. Therefore they are bulking up their lot purchases. That activity further reduces the supply of available residential lots in the most active market segments.

In these uncertain times, it is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is land.