Here is an interesting and very telling comment from a buddy of mine who works in land acquisition for a major builder in Orange County:
“We are seeing the beginning of a slowdown in Orange County although not as much as in other areas it appears……yet. The two market areas in Orange County that are very vulnerable are the platinum triangle in Anaheim and an area called the IBC which is basically Jamboree rd in Irvine. The first high rises are just being completed at Jamboree and 405 by Bosa Development with most of the units purchased by investors trying to flip them. Both the Platinum Triangle and the IBC have thousands of units in process and developers are starting to quietly market their sites to other builders……the greater fool theory in action. The most lucrative opportunities I see are picking up commercial or industrial sites adjacent to new or planned retail centers called “lifestyle centers” with theaters, shops, restaurants, etc. and rezoning to build mixed use podium projects with residential densities of 40 units per acre or more, but limiting the size of each project to under 200 units so as not to saturate the market. I’ll keep you posted. Good luck!”
I have also seen some large land parcels for condo development recently come on the market in downtown San Diego. A very clear message that a market is softening is when bulders and developers start selling thier entitled land to other builders and developers instead of sticking with their initial plans to build out the land. And even more telling is when those parcels are listed with large brokerage houses as opposed to being sold builder to builder. (Oftentimes master planned community developers will sell some of their land to other builders to spread risk but what’s starting to happen now is a whole sale elimination of risk, by unloading properties that, with long lead times or softening markets looming, may not pencil by the time you have built them out). Entitled land has been extremely difficult to come by during this last run up in the hot residential building market but if buiders and developers are starting to sell in increasing numbers their hard gained land and start flooding the market with to be built projects — watch out below).
