So much land, but so few buyers

By Buck Wargo

Sunday, July 15, 2007 | 2:31 a.m.

The next major auction of federal land for new housing tracts in the Las Vegas Valley won't occur until November 2008, in part because builders aren't clamoring to build more neighborhoods, or local planners haven't yet prepared for them.

The slowdown in auctions is another indicator of the declining market for residential real estate, which is suffering from a glut of homes and declining sales prices. The Bureau of Land Management sells land at auction at the request of municipalities, which generally react to the demand for new buildable acreage.

In the case of Henderson, for example, the city isn't giving the green light because it hasn't decided what land should next be developed - and at the moment, developers aren't pressing the city to make more land available.

BLM land offerings have been sparse since November 2005, when the federal agency auctioned two large parcels in North Las Vegas for $639 million and several other parcels for $152 million .

The agency will auction small parcels in November, with plans to offer about 150 acres in scattered parcels as small as 2.5 acres and as large as 20 acres in west Henderson and the south Las Vegas Valley.

Henderson hasn't had a major parcel auctioned since June 2004, when Focus Property Group paid $557 million for 1,940 acres that are being developed as the Inspirada master-planned community.

BLM auctions are prompted by nominations from cities and Clark County. None has suggested the BLM auction those larger parcels, said Juan Palma, a BLM field manager.

A year ago the BLM said it would sit on the sideline if necessary and be more selective in the parcels it offers as part of a strategy to be more market-driven.

The agency has drawn fire from some in the development and real estate industry for not releasing land on a regular basis to keep up with growth and hold down its prices. Palma said the BLM has no reason to apologize.

"I don't think people understand the process," Palma said. "We don't know what the cities and county have in terms of infrastructure and roads. We can't be willy-nilly and sell land if cities aren't ready for that to happen. If there are no developers showing interest in the land, we would spend a lot of money for nothing to get ready for a sale."

The last BLM sale was in March , when 25 acres of the 46 acres on the auction block sold for $12.4 million. A November auction was canceled and during an August auction, 22.5 acres of 488 available acres sold for $9 million.

Because the BLM prefers plenty of lead time to conduct auctions, Palma said any auction of larger parcels may not happen until November 2008. Henderson officials hinted they could be ready as early as March for an auction of 700 acres south of Inspirada that abuts the Sloan Canyon National Conservation Area. Between 1,000 and 2,000 acres in west Henderson would not be part of an auction at that time.

The housing industry won't be disappointed if the BLM holds off on any major land auctions, said Monica Caruso, spokeswoman for the Southern Nevada Home Builders Association. With the housing downturn, builders have laid off employees and focused on selling inventory rather than acquiring land, she said.

"I think they recognize demand is not there at the moment, and it's a wise decision," Caruso said.

The decision to postpone land sales is a reflection of what's happening in the market as a whole, analysts said. Land sales have been down but not because of any lack of demand. Prices have held steady because prospective buyers aren't willing to pay the amount sought by land owners.

"Everybody thinks their property is a gold mine," said Vic Donovan, the managing partner with Colliers International.

Even if larger parcels were auctioned now, they wouldn't be setting record prices because of the market conditions, Donovan said. Until the next round of resorts open along the Strip and push up demand, land prices are at their top for now, he said.

Richard Lee, vice president of First American Title, said he doesn't think there would be any bidders right now for the larger parcels because of the high inventory of homes on the market. No one could afford to sit on that land given the current demand for housing, he said.

North Las Vegas Mayor Mike Montandon said there's no reason to auction land now unless the BLM changed its practice and accepted bids for less than the appraised value. He said his city doesn't nominate land unless buyers show interest.

The Olympia Group has just launched its development of Park Highlands in North Las Vegas.

Henderson Community Development Director Bristol Ellington said the city isn't prepared to auction any larger parcels in part until it completes hydrology studies and identifies the amount of land it wants set aside for open space. It's much easier to identify areas that should be removed from auction than it is to sell it to a developer and request it be set aside for open space, he said. Henderson recently completed its open space plan.

No consideration has been given to Focus Property Group and its development of Inspirada, which opened model homes this year for its 13,500-unit project, Ellington said. But he acknowledges it will benefit Inspirada if any nearby development is delayed.

"I know companies would like to see themselves established and ride out this economic slump before there is other competition, but at some point it helps to have healthy competition," Ellington said.

The Henderson properties slated to be auctioned in November will be north and west of Inspirada and range from 5 to 15 acres, said Stephanie Garcia-Vause, Henderson's deputy director of long-range planning. Many smaller builders have requested parcels of that size because they can't compete with the big developers, she said.