Wed. Apr 8th, 2020
landscaping architecture trends

Land Development Trends in 2020

The land market marches towards the beating drums of the population growth and the bigger economic cycle. Annual population growth has now slowed down by nearly 50 per cent in the US over the last 25 years. That translates to over two million in the annual population growth today than four million annually in the year 1992.  Specialist retail valuers are now more valuable than ever! 

At a slower growth, the US is requiring one million new housing units each year. It has added 735,000 new housing units each year over the past 10 years. The pre-recession over the building has now been absorbed which resulted in an increase of home value and higher rent which is further advanced that wages are. The FHA increased the loan limits for the year 2019 by around 6.6 per cent across the US metro which reflects tightly on the real estate market. 

The economic growth is providing jobs and increased investments while retracting economics lose or are very stagnant in the investment and population.

Builders are challenged to be building affordable homes for the basic income earned, the reach for delivering the affordability has various implications on the housing and land markets. The factors are influencing the buying of land and lots which is resulting in 10 megatrends within the land market.

Land and lot developers (also known as selling land for development) along with homebuilders are seeing a big increase in the difficulty of underwriting certain projects to obtain the returns they are searching for. This is showing fewer lots being delivered which is then causing upward pressure on the pricing of the lots. Builders are being required to get into land development versus just relying on their party developers.

Builders are still wanting that lighter balance sheet and prefer not to be “long on land” which was one lesson learned from the last recession. With the wholesale buying of big tracts taking from the picture, the smaller purchases and the granular delivery are beginning to trend.

The lot banking will continue to be an ebb and flow with the public builders that are citing margin deterioration which is the main objection seeing the return enhancement as the second. Private builders are seeing the inverse of this needing a bigger rate of return in order to cover capital costs and are not as hyper-focused on the margin. In both cases, banking will play a big role in the next year for the increase in equity efficiency and hedging against the worries of housing slowdowns.

Land that is in the A and B areas are sitting heavily in play for new developments. Much of the development is self-developed by the builders instead of the middleman land developers. The luxury apartments and the independent/assisted living homes, garden-style apartments and student housing will dominate the infill land markets. 

It is looking like the homebuilders are not shut out of the true infill which is due to the highest users being able to pay more for the land in those particular areas.

The C and D lots that are finished and are leftover from our great recession are being grabbed fast. The remaining lots are the last with the ability to deliver a home under $250,000.

These being below replacement cost the lots are being absorbed quickly and the activity on the land in the C group is starting. The challenges facing here are that edged areas are offsite, large scale infrastructures are required to live off the new developments which will cause an increase in usage of financing in order for the infrastructure to be built.

With these below replacement cost, lots are being quickly absorbed and activity on land in the “C” markets has commenced. The challenge in many edge areas is offsite, large-scale infrastructure. 

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