At our Professional Builder Benchmark and Avid Leadership Conference this month in Phoenix, I had a conversation with Atlanta-based international developer Charles Sheron, who has maneuvered his company, The Sheron Group, through five housing recessions and thus qualifies as an expert on what action builders ought to take and when to take it. I asked him whether builders should even plan to develop land as long as the current oversupply of lots persists.
“It's a local question,” he said. “The first order of business is to make sure you survive this downturn. And as long as you can buy lots for less than replacement cost, with very soft terms, that's probably the way to go. But you can't count on that if the market comes back.
“The other thing is, because of the energy crisis, there are a lot of lots, in distant ex-urban locations, that may never recover their value. But if you are willing to take that gamble, in the next year or so, you can pick up some really deeply discounted lots that may pay dividends a couple of years later.”
Sheron said you may think you don't need to develop land for the next 10 years, but predicting market conditions beyond the next two or three is a dicey thing. Sheron took the gamble on distant lots in the Atlanta market in past recessions based on his assessment that “eventually, they will all come back into play, and builders will need to develop land again.” But he wasn't dealing with $4 a gallon gasoline prices then.
“The other thing I'm concerned about now,” he says, “is how municipalities will look at land that is entitled now but undeveloped or in various stages of development. How long will they wait for a builder to use that land before pulling the entitlements?
“It's really hard to address this subject generically,” Sheron cautions. “It's so local. But in Atlanta, it appears some of the public builders are already flipping over from land sellers to acquisition mode. They're buying!”
The best policy for strategic planning: Never say never. If you've had to develop land in your market in the past, you probably will need to do so again. And remember, it can take years to entitle and develop raw ground.
Related Stories
Business
Entries Closing Soon for Best in American Living Awards
Custom builders have only one week left to submit their projects for recognition
Awards
Three Custom Homes Honored by Best in American Living Awards
These three custom homes stood out in the Best in American Living Awards for their site sensitivity and attention to detail
Awards
Home Design: A Mellower Modern
Three New England contemporary homes show modern architecture's softer side
Awards
Impeccable Execution
These custom homes captured top honors in the 2017 Best in American Living Awards with their brillant synthesis of design and craftsmanship
Awards
BALA-Winning Custom Homes Set High Standards
Three Platinum winners from the 2016 Best in American Living Awards show how custom is done
Awards
David Weekley Homes honors top suppliers with Partners of Choice Awards
Houston-based David Weekley Homes last week announced the winners of its Partners of Choice Award, which recognizes the product suppliers that ranked highest in satisfaction by approximately 500 David Weekley staff members.
Awards
Quick! Bookmark HousingGiants.com
Housing Giants is making another big leap, and this time, you have more opportunity to contribute
Awards
Buffet and Lurz Say It's Time to Buy
Bill follows Warren Buffet’s words – and hopes the public does, too, he notes in his blog, Ear to the Ground.
Awards
Key Accountability
Diligent training and follow up keeps his staff on its toes and product moving in a market that just got a little tougher