Farm fields around the metro area are selling more slowly these days as national builders scramble to sell new homes they’ve already built, buyers and sellers involved in the transactions say.
For example, Brighton-area developer Craig Carlson said he recently dropped an option to purchase an 800-acre parcel south of Brighton after working on the transaction since 2000.
Melody Homes, a division of national homebuilder DR Horton, walked away from a rumored $1 million that the company spent on plans and development issues on a parcel east of Longmont earlier this year.
While Melody did not return phone calls about the parcel, Marv Dyer, owner of Dyer Realty, which handled the transaction, said the property sold mid-year to another buyer.
“I think every one of the homebuilding companies in Colorado, whether publicly or privately owned, are concerned about the future of the market,” Carlson said. “It’s a very cyclical business, and I think 2007 won’t represent a lot of acquisitions for residential property to be developed by homebuilders.”
If homebuilding companies already have contracts on parcels, they’re trying to reposition themselves by putting off contracts as long as possible while waiting until the market gets better, said Bob Holmes, a real estate lawyer with the Denver firm Holme, Roberts & Owens.
“I think there is a general slowdown, and, on my side, more a shift in money away from (agricultural) land to developed property,” Holmes said. “But I haven’t seen personally where somebody backed out of a deal.”
KB Homes is one homebuilder that’s treading carefully in the more volatile market, said Rusty Crandall, the company’s division president in Denver.
“We are being very careful about making any large investments and where we have our land acquisitions, we’re only buying those parcels that fit our strategy perfectly,” Crandall said.
What that means in business terms is using information gleaned from the company’s new homebuyers about what they’re buying and why, Crandall said. For example, since home owners say they don’t want to commute to work more than 30 minutes, KB is building in places like Greenwood Village, Centennial, Parker, Castle Rock, Lone Tree, Golden and Stapleton, he said.
“Our strategy is to stay as close in as we can, and hopefully find some infill-type properties,” Crandall said. “We’re not going to run around town and buy property just because it’s for sale.”
Farm-field sales are worse in states like California, Nevada and Florida than in Colorado, Carlson said, because new home prices shot up in those states even more quickly than they did here, and now that prices are dropping across the country, they’re affecting how much new construction gets built.
KB’s Crandall said the company’s house prices have “stabilized,” but he added that in any “good location,” including the new Canyon View neighborhood in Golden where the company is building houses in the price range of $500,000 to $600,000, “values continue to go up.”
Earlier in the year, property owner Jim Anderson sold more than 500 acres east of Longmont before the slowdown started in earnest. The buyers, investors with offices in Nevada, will go through the process of getting residential zoning themselves, he said.
Anderson declined to say exactly how much the buyers paid. Such raw land north of the metro area is selling for $30,000 to $50,000 per acre, Carlson said.
“We did close, even though some people did walk away (earlier),” Anderson said. “Some developers just tie it up for a month or two. It’s just kind of part of the process.
“They invest millions before they get any money back.”
Because most farms are never officially listed on the real estate market, it’s hard to assess how widespread the agricultural land downturn is.
“For every group that walks away, there’s another one that walks in and purchases it,” Anderson said.
“Colorado is a hot area, and the Longmont rural area is going to be a beautiful place when it’s all built up with good infrastructure, good highways and a good climate.”
