Source: Tom Reimers, President, (949) 852-8288 x28
While the land market in the Bay Area has continued to improve and in many primary in-fill areas the market is back within 20% of peak values, the secondary and tertiary markets are still bouncing along the bottom with land values that are typically only 20% of peak values. This seems to be an unsustainable condition. Back in 2003 or 2004 when land prices in the Bay Area were approximately where they are today, land in outlying markets (think the cities of Brentwood and Gilroy, for example) was consistently trading for 2 to 4 times what it is trading for today.
So it seems that the market is at an inflection point, either the 2,000+ units per year that all the public and large private homebuilders combined in Northern California need to produce to cover their fixed costs are going to come in the form of 50 lot and smaller infill developments (Door #1), or the outlying Bay Area land markets are set for a major rebound. Maybe it’s time to see consider what kind of deals you can find behind Door #2.
Source: Steve Reilly, Marketing Consultant, (925) 368-3128