Why Single Family Finished Lots Have Great Upside (If You Have Some Holding Power)
July 1st, 2008 | top of page
You need look no further than the pages of this month’s newsletter to know that homebuilders in Phoenix are under duress. The supply of single family lots—some held by the homebuilders themselves, some held by land bankers, and some held, or soon to be held, by lenders—greatly exceeds the homebuilders’ current appetite to produce spec homes. As of December 2007, Maricopa County had 160,000 lots and Pinal County had 220,000 lots. With just 1,275 new home permits pulled in June 2008 that’s a 10 year supply in Maricopa County alone!
But, not all lots are created equal. There are Paper (platted) lots, Platted & Engineered (P&E) lots, and Finished lots. The key ingredient added to P&E lots to turn them into Finished lots is OIL. Think about it. Oil and oil by products are used in just about every task required to produce a finished lot. Diesel fuel drives all the machinery used to move and grade the dirt. The machinery’s tires are made from an oil by product as is all of the PVC pipe and conduit. Even landscaping is affected as fuel powers the crusher that produces the gravel. What does all this mean? If you can buy finished lots today at prices well below what homebuilders were paying for finished lots 18 months ago (and I know you can), and you have some holding power, then you have a commodity that it will be next to impossible for current P&E lots to compete with. The oil and oil by products needed to produce new finished lots are now based on $125± per barrel oil meaning their production costs are much, much greater than finished lots made with $80 per barrel oil. Which lots do you think are going to get bought up by the homebuilders first when demand returns? Contact me to discuss opportunities in finished lots as not all finished lots are created equal.
Dedicated To Multiplying Your Income
PS – If you are ready to begin to thrive again by getting off the sidelines and putting your money to work give me a call at 602-320-6200. I see lots of deals and may have just what you are looking for.