Scarce land could blunt recovery for nation’s largest homebuilders

http://www.thenewstribune.com/2014/04/16/3151342/scarce-land-could-blunt-recovery.html?sp=/99/261/

Scarce land could blunt recovery for nation’s largest homebuilders
By SAGARIKA JAISINGHANI
Reuters
April 16, 2014

A resurgent U.S. housing market has created an unforeseen land shortage that could take the shine off an otherwise promising year for homebuilders.

To keep up with demand, builders who neglected to buy land during the downturn must now pay top dollar for prized city-center locations. Their profit margins are likely to be squeezed this year, even as house prices rise.

“Builders waited so long to buy land that, when the recovery happened, it was very strong and they got caught short,” said Tobias Welo, a portfolio manager at Fidelity Investments.

The quickest solution for the big players, according to some analysts and fund managers, will be to snap up small, privately owned builders facing the opposite problem: plenty of land but limited access to bank finance. The Dow Jones U.S. Home Construction index has regained much of the ground lost in the second half of 2013, when rising mortgage rates and wider economic uncertainty broke an 18-month winning streak for homebuilder stocks.