Foreclosures fuel land bargains for investors

By Buck Wargo (contact), In Business reporter

Fri, Nov 20, 2009 (3 a.m.)

Foreclosure sales are dominating the raw land market and suppressing prices, but they are creating bargains for investors, analysts said.

Applied Analysis reported that nine of 10 sales in the third quarter were a result of a foreclosure. That spurred more demand with 411 acres sold compared with 395 in the second quarter. It’s the third consecutive quarterly increase.

The number of parcels sold increased sharply to 248 transactions, up from 107 in the second quarter.

The bank-owned properties are driving down land prices, with a per-acre average price of $226,000 in the third quarter, down from $225,309 in the second quarter, according to Applied Analysis. Raw land prices have dropped by about half in the past year: The price per acre paid in 2008’s third quarter was $459,798. Prices haven’t been that low since late 2003, the firm said.

Land sales have started to trade in a fairly steady price range, which means that prices are starting to stabilize, said Jake Joyce, a project manager at Applied Analysis.

Buyers have gone after some unimproved lots on the valley’s periphery in the southwest and northwest near Kyle Canyon, Joyce said. Applied Analysis tracks sales of raw land of a half-acre or more. Much of the interest has been in parcels of 5 to 20 acres, Joyce said. One parcel was a 56-acre residential site in the northwest valley near the Las Vegas Beltway that was sold to an investor group for $88,000 an acre, Joyce said.

Prices are down 80 percent to 90 percent in some submarkets in the last two years, Joyce said. Overall, prices are down 76 percent since the peak of the market in the fourth quarter of 2007 when land sold for $939,000.

That is a much steeper drop than home prices, which since the peak have dropped 57 percent.

“Land values have deteriorated at a much steeper rate than homes,” Joyce said. “We are starting to see investors pick up land because prices have deteriorated so much. They see the long-term value. Some investors believe in the overcorrection theory that there is opportunity.”

The demand for unimproved residential lots, however, pales in comparison to lots with water and sewer lines, analyst said. Builders and investors have targeted properties to prepare for an increase in home construction.

Dennis Smith, president of Home Builders Research, said much of the demand has been for finished lots and suspects it won’t be until 2010’s second quarter before interest picks up in raw land.

“Eventually it will be there, but is not there yet, “ he said.

Joyce pointed out there isn’t a rush to buy the raw land because there are thousands of bank-owned homes that have yet to hit the market, and the vacancy rate for commercial property is high. Those who have the ability to buy and hold are the ones taking advantage of this, he said. Of those areas sold, they are closer to where infrastructure is in place and can be developed when the economy improves, Joyce said.

That was the case on the Strip where HCD Real Holdings of Kansas purchased the former Klondike Casino. The 5.24-acre site sold for $17 million or $3.2 million an acre as part of a foreclosure sale.

Discussion: 11 comments so far…

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By dodgerchuck

Nov. 22, 2009

7:31 a.m.

Suggest removal

how is $226,000 down from $225,309.same old story,rich get richer with well-heeled investors snapping up distressed properties at below market prices.it takes money to make money and if you dont have any your mr nobody.
By KillerB

Nov. 22, 2009

12:31 p.m.

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redneck43 -- pay attention here . . . this article is about lots, not houses.

mrability -- apparently your "ability" doesn't include either literacy nor relevance.
By wizardofOz

Nov. 22, 2009

1:15 p.m.

Suggest removal

You're missing out on:

IRS Section 42: The Low Income Housing Tax Credit

(TRA86: Tax Reform Act of 1986)

Read it for yourself:

http://en.wikipedia.org/wiki/Low-Income_...
By Boomer111

Nov. 22, 2009

1:21 p.m.

Suggest removal

New idea: Sell the land to Sec 8 bums for $35 bucks an acre. then
the bums can demand the difference from the government, which is
really us, the taxpayers.

I say tear down Wynn and put up a golf course, ya that will solve everything.

Rebuild Wynn on the Sec 8 land and rename the casino: Win-Lose
By carletonfran

Nov. 22, 2009

4:25 p.m.

Suggest removal

To KillerB:

Yes, what you say is eminently true! However, I think it's either/or and neither/nor, albeit I could be wrong. A goast town indeed!
By LORDGLENMORE

Nov. 22, 2009

4:35 p.m.

Suggest removal

Stop whining about the very business community you are depending on to pull Vegas out of the mud.
Business built this place.
Business provides the jobs.
Business will provide a lot more jobs and will carry on building this place while some of you are still crying in your beer.
So less of the cheap shots about section 8.
Show some backbone.
By Bill-Owl

Nov. 22, 2009

6:38 p.m.

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LordGlenmore

The Mob built this place , and when they ran it Las Vegas was a Great Place to Go !!! Now it more or less SUCKS !!!
By markp

Nov. 23, 2009

2:08 a.m.

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lots are not cheap, there are better places in the world to invest money into land, las vegas is not one of them.. it has been proven, expanding las vegas led to a dramatic failure when recession hit, I doubt there is much propsect of making decent returns expanding it any more, what happens during the next recession?

Dont forget recessions come in cycles and fast growing cities always fail badly especially when the only real skills are gambling, serving food or drink and dancing..
By dcesen

Nov. 23, 2009

2:46 a.m.

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LordGlenmore ,Bill-Owl is 1000% right and it appears that Vegas is a very dangerous city and that was never that way when the mob ran it, also the one incident when the drug dealers snacthed a little kid THIS also would not have happen if it were still mob run. But u people thought u could do it better and now look at what u have. It is ashame that so many people missed out on the era.