Triangle Land Rush

Ready lots moving off market, prompting developers to shop for fresh land. Big home builder groups such as D.R. Horton and Pulte Homes are getting back into the land development business as the supply of ready lots begins to diminish across the Triangle.

D.R. Horton on March 30 paid $5.15 million for 127 acres of mostly undeveloped land at the intersection of Buffaloe and Forestville roads in North Raleigh. There it plans to build a new home community called Bryson Village. Pulte's Centex division in 2011 paid $6 million for 130 acres in Fuquay-Varina where the new Alston Ridge community is under way. Similarly, Lennar paid $5.3 million for 40 acres in west Raleigh where it is building its Inside Wade community.

Supply May Be Tightening

The trend I'm looking at is the builders who originally were needing a minimum of 100 lots started going down to 50 lots, then 20 lots. Now, they're saying we'll take 10 to 15 lots in the right locations, says Jim Anderson, President of Fuller Land & Development in Raleigh, which helps broker land and lot deals for home builder groups. That's a sign that supply is tightening he says.

D.R. Horton President & CEO Donald J. Tomnitz noted in a January conference call with analysts that his company spent $229 million in its first fiscal quarter on investments in land, lots and development costs. Tomnitz also noted that any investment in lots or land in any of D.R. Horton's markets must fit within the company's two year supply guidelines.

Land Development Requirements

Our current underwriting guidelines require that with any land that we invest in and any land that we develop, that we get our capital returned in 18 months, sometimes, at the worst-case basis, if it's a great deal, 24 months, Tomnitz said. Anything greater than a two-year supply, we're going to be partnering with other land developers and make sure they hold those lots that will require greater than two years, as opposed to us holding them on our balance sheet.

In the Triangle, D.R. Horton ranked No. 3 for the dollar volume of homes sold in 2010 behind Pulte and M/I Homes. Lennar Corp. ranked No. 4. The land that Fort Worth, Texas-based D.R. Horton purchased for Bryson Village in north Raleigh had previously been under development for Terramor Homes of Raleigh. About 40 lots were completed around the time the housing market started to tumble, but no homes were ever built.

Neither D.R. Horton's central North Carolina division president John Nance nor Terramor CEO and owner Pablo Reiter returned phone calls for comment.

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