Investors cash-in on land deals as U.S. housing picks up

NEW YORK , Mon Sep 10, 2012 – From the outskirts of Las Vegas to the coast of California, stretches of undeveloped land in some of the most depressed housing markets in the U.S. are in high demand.

Money managers such as BlackRock Inc, hedge fund Angelo Gordon & Co. and real estate investment firm Starwood Capital, are beginning to cash-in on so-called shovel-ready residential land-tracts with most of the pre-construction and zoning approvals already in place.

The investors snapped up land on the cheap in bankruptcy proceedings, from cash-strapped home developers and banks that seized the properties after foreclosing on them when builders ran out of money.

Now they are re-selling the land, often for returns of more than 20 percent on their initial investment, in the latest sign of a modest recovery in the U.S. housing market. Other investors, meanwhile, are looking to partner with homebuilders to develop the tracts.

Some, like Paulson & Co, which has also been active in the space, will hold onto the land for some time before re-selling it to buyers.

“We are coming out of the mother of all housing cycles, and residential land is the best way to play the ultimate recovery,” said Michael Barr, a Paulson & Co portfolio manager, who oversees the Paulson Real Estate Recovery fund, which has under $500 million in assets for the $19.5 billion hedge fund. “Land is the highest returning component of the home building equation.”

Long road to U.S. housing recovery despite tighter supply

WASHINGTON, Wed Aug 8, 2012 – U.S. home prices are inching up as an ebbing tide of foreclosures creates a shortage of properties at a time of pent-up demand, but do not expect the housing market recovery to shift into higher gear.

Tightening house supplies have turned some parts of the country into sellers’ markets, marked by intense bidding wars among buyers eager to take advantage of rock-bottom mortgage rates and still-low home prices.

“It is encouraging that demand is flowing back into the market and buyers are getting off the fence at last,” Stan Humphries, chief economist at real estate group Zillow told Reuters.

But it’s not off to the races for the housing market, the main trigger of the 2007-09 recession. Many homeowners remain saddled with properties worth less than the amount they owe banks and other financial institutions.

This means they cannot afford to sell their houses, even if they wanted to. As such, the supply of houses on the market will remain tight and weigh on sales.

Home resales declined 5.4 percent in June, with realtors blaming the drop on lack of inventory.

Contracts to buy homes, a forward-looking indicator of sales, also fell during the month for the same reason, casting a shadow on the budding housing market recovery.