Residential Land Heats Up

It’s been a long hot summer here in Southwest Riverside County, but the temperatures were not the only thing on the rise in this red hot corner of the market.

Demand for residential land is on the move.

In September, Reuters published an article about the current market and how some big investment firms such as BlackRock, Inc., Starwood Capital, and Paulson & Co. are snapping up land and unfinished projects in areas from Las Vegas to the coast. The “mother of all housing cycles,” as one observer put it, has set the stage for a land rush on residential properties in good locations.

Paulson’s Michael Barr, a portfolio manager, was quoted as saying that “residential land is the best way to play the ultimate recovery.” Paulson is actively investing in land, especially projects that have been in the pipeline and have completed improvements.

Paulson is one of many groups actively involved in the residential land market. Hillwood Development, and the McRae Group of Companies are also taking an active share in the space.

“We are seeing more funds being formed, and more money pouring into the residential land market throughout the southwest,” says Rancon Group Vice President Darryl Stephenson, who manages the securities team at Rancon. “On one hand, most investors are out there looking to buy up distressed housing. On the other hand, Rancon Group and other like-minded investors are buying up large parcels of residential land.”

Many of the big investment funds will be holding the land for a future sale, says Stephenson.

“It all depends on when they enter the market and where the property is located. Properties in prime locations that were purchased in 2009 or 2010, could be selling today for a good profit. If you are entering the market today, you may have to wait for a couple of years for a significant return,”he said.

Homebuilders are also revving up for a new cycle, according to the article.  Jeffrey Metzger, CEO of KB Home, said his company is “aggressively reinvesting in new land assets and communities.” Lennar is said to have invested more than $287 million on land and development just in the second quarter of 2012.

“The market is turning and we are seeing more and more homebuilders coming back in to the market,” says Frank Igo, Director of Development and Construction for the Rancon Group. “Of course, location is the key and we have some very attractive shovel ready projects in some of the best locations in Southern California.”

The Rancon Group has more than a dozen residential land properties in the development process.  These are in prime locations within Southwest Riverside County and several of the projects are in infill areas with bluetop lots. Featured projects that are ready-for-sale include Eldorado, French Valley 41, Monte Vista and Wildomar 51. Contact Darryl Stephenson for more information.

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