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Why the Rush for Investors to Buy Land? Genius or Madness?

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It all makes sense

land for saleWant to know why billionaires like hedge fund manager John Paulson are buying building lots left and right? Is it because they want to give the builders a private bailout, is it because their targets in Arizona, Colorado and Nevada are performing well and they’re betting on those areas?

Nope. There is a rush to buy land because if the investors hold all the prime/desirable land that homebuilders will eventually need in order to make their comeback in these poorly performing areas, builders will have to come to them. Builders are counting on snatching up land at distressed prices and guess who they’ll have to go through? The investors that are betting on the future.

Connie Madon of BloggingStocks.com said, “What this indicates it that even in the midst of a brutal housing downturn, some companies are willing to step up and take a risk on the future. If new home building picks up this year, we could see the bottom in the housing debacle.”

So, is this a dumb bet or is this a genius move?

Lani is the Chief Operating Officer at The American Genius - she has co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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21 Comments

21 Comments

  1. Brandie Young

    March 2, 2010 at 2:18 am

    There’s a saying “Buy land—they’re not making any more of it” I think attributed to Will Rogers. At any rate, it’s the long game and IMHO a wise move.

  2. Coy Davidson

    March 2, 2010 at 3:16 am

    There will be great wealth created in the next few years for those with the cash and resources to buy key residential land assemblages at distressed prices and the staying power to hang on until the market has fully recovered.

    I remember back in 1990 selling a RTC listing that was a 332 acres parcel fully improved with roads and utilities for 2,500 per acre. All the buyer had to do was wait for the housing market to return and then start selling lots for builders.

    That buyer’s office is in my office complex and I still run in to him at lunch every month or so….He smiles big every time he sees me….He won big on that deal! At the time I brokered that sale, I was a green 2 year veteran of CRE. I see a deal like that again and I will be putting the deal together for myself.

  3. Joe

    March 2, 2010 at 8:57 am

    I would say “madness” unless of course a person has a strong financial position. We own land and there is no cash coming in until it sells. Purely speculative.

  4. Justin Boland

    March 2, 2010 at 9:56 am

    As a long-term move, clearly genius. As petroleum winds down, arable land will be gold by the acre. These guys have the capital AND liquidity to just freeze up money in land for decades, so it’s a great move on their behalf.

    Would I be advising middle-class, small-change investors to follow their lead? Not for a second.

  5. Al Lorenz

    March 2, 2010 at 2:51 pm

    The answer to your question won’t be known until the investors sell. I’m happy to see some folks, and these are folks used to evaluating risk, see the promise of profits in buying today.

  6. Nashville Grant

    March 2, 2010 at 5:17 pm

    That and the fact that John Paulson is ex-treasury secretary Henry Paulson’s brother who handed him IndyMac on a silver platter!

  7. Joshua Dorkin

    March 3, 2010 at 1:58 pm

    From dictionary.com:
    Speculation = engagement in business transactions involving considerable risk but offering the chance of large gains, esp. trading in commodities, stocks, etc., in the hope of profit from changes in the market price.

    This would certainly constitute speculation, and if you’re not familiar with land investments, or if you don’t have the ability to hold for the long term (that’s L O N G), then I’d say to stay away. Like other types of property investments, investing in land is not for the novice or uninformed.

  8. Khary Reynolds

    March 3, 2010 at 11:46 pm

    I think this is a genius move. Granted, it is a long term, “capital appreciation” play, but if you have the excess cash to buy and hold land, I truly believe it will give a better return in the next 5-10 years than most speculative “capital appreciation” investments.

  9. Rick Kimber

    August 4, 2010 at 9:49 pm

    I own several hundred acres in Nevada that I would love to sell. Please tell these Investors to e-mail me. I have some great deals!

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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