High Risk/High Return: That’s been the long-standing equation land developers have lived by. In the boom and bust of the residential land market, the bottom fell out of the equation. Banks have taken back tens of thousands of acres, or the developers themselves have been forced to sell.
Now, in Southeast Michigan, the market seems to be righting itself. The demand for residential land is picking up as buyers realize incredibly low prices for both improved and unimproved land.
In Wayne County, 34 percent more building permits were issued in 2010 than in 2009. For example, Northville Township and City granted 45 building permits in 2009, but more than double that number—100 permits—in 2010. In Plymouth Township and City, the turnaround was even stronger: In all of 2009 only 4 building permits were granted there, but by the end of 2010, the number had surged to 112.
Oakland County building permits increased by 45 percent between 2009 and 2010. In the city of Novi, the 64 permits granted in 2009 grew to 174 granted in 2010, while in Lyon Township the number grew from 57 to 112.
Watching these numbers closely, we offer the following observations:
Subdivisions left unfinished when the market collapsed now offer builders infill opportunities at bargain prices. Low land costs have helped create margins that make the finished home very affordable and competitive. Plus, historically low mortgage rates are bringing even more buyers to these builders.
The very farmers who sold large parcels to developers during the run-up in pricing are, in some cases, buying back the undeveloped acreage. This land may return to agricultural use for the time being, waiting for the next cycle of development.
While we are unquestionably still in a deep downturn, land is moving from weak hands to strong ones. Substantial gains seem possible in the near future for far-sighted investors and developers.
If you are one of these, we have multiple developed and undeveloped parcels now available at prices not seen in decades. It will be our pleasure to partner with you.
Joe Tuomikoski (jtuomikoski@thomasduke.com)
248.476.3700 ext 1109
