Joe Fogarty deals in land, and over the past few years, his real estate agency's land sales business was through the roof as area farmers sold off entire farms that had been in their families for generations, feeding the land-hungry developers.
But these days in the city of Woodbury, Minn., there are few farmers left who want to sell land, and even fewer builders willing to buy it.
The biggest is that the town of 57,000 residents has decided to control growth, allowing raw land to be opened up only parcel by parcel. Right now, Woodbury is in Phase 1 of its master development plan, which will end in 2020. Under this first phase, which will be completed in 2009, about 600 new housing units a year will be built, a far cry from the 1990s, when the pace was more like 1,500 new units a year.
Second, the softening housing market. K. Hovnanian walked away from options to purchase 50 acres here, and though Pulte Homes picked them up, it, too, walked away.
“We do not have a great excess of lot inventory. We're in balance in Woodbury,” Fogarty says. “I think there are people willing to sell land if they find an attractive price. [But] the builders have the ability to sit back and wait.”
With a slow growth policy, builders are doing just that. The smattering of farmers left in the community are also biding their time. They look at land as a retirement asset that they'll cash in one day in the future, on their terms.
Paul Burandt farms 75 acres that have been in his family since 1872. Now, the 47-year-old farmer rents additional farmland to supplement his grain crops and cattle rearing, but that land is becoming scarce as more and more lots are being sold for development. Over the years, Burandt has been approached to sell his land, but he is waiting for a better price.
“It's inevitable, given the proximity in the metropolitan area,” Burandt says. “But it's a double-edged sword. It's the demise of your career, but if you want to be rich, you have to quit your life farming the land. We have the best of both worlds. We have the worst of both worlds.”
Jacob Jordan, 82, has worked his 120-acre farm all his life. His son, Jake, says his father has no intention of ever selling. “People call all the time. Dad entertains these offers. But right now, Dad says, ‘I'm not interested.' Dad would probably sell a portion off the back. But he wants to die here,” Jake explains.
The elder Jordan and Burandt are part of a fading breed. “There really aren't many farmers here. They sold out long ago. Most of the land is held by developers,” Fogarty says.
Still for Sale
Few people are willing to talk about the 50 acres of land that K. Hovnanian walked away from last fall. Tim Thone, the original landowner who runs Thone Development Co. in Woodbury, declined to talk about it, as did executives from K. Hovnanian.
City Mayor Bill Hargis says that most of the vacant land in Woodbury has been spoken for or optioned even though it may be 2020 before builders get a chance to put down sticks. Woodbury is now about 50 percent developed, he says, and housing is still in demand. Land is cheaper for builders if they have to wait to build, he says. Land is currently selling for $100,000 to $200,000 an acre, when it does sells, according to Fogarty.
With its easy commute to St. Paul and Minneapolis and easy access to major highways, “People want to live here,” Hargis says. “We have a city being developed in phases. The developers know the phasing plan. We're in Phase 1.”
Still, the housing slowdown has hit Woodbury, too. Townhouses are selling, but the resale market has slowed down, Hargis says.
“It didn't hit Woodbury as quickly, but the entire Twin Cities region has been hit by the housing slowdown,” says John Rausch, a land dealer with United Properties that does business in the Twin Cities. Land sellers are now turning to commercial and industrial users to buy their property, he says. Industrial land sales are healthy. “Office is beginning to gain some strength. Retail is slowing down. Housing is the slowest of all property types,” Rausch says.
Habitat for Humanity is building in Woodbury—48 homes are currently under construction or planned. A partnership with Centex Corp. will give Habitat the ability to build 30 new homes: The nonprofit builder is now looking for a land bank to help it buy lots at better prices.
“We'll buy land from anybody,” says Karl Batalden, specialist in government and community relations at the Twin Cities Habitat for Humanity. “What seems to work for us is to buy land from government entities and developers, the big developers. Land development is their business, so we can pay a premium to get that land and the developers has done platting, zoning. It's pad-ready land.”
Unlike Las Vegas and Phoenix, which have huge tracts of land to develop, Batalden says land around Minneapolis and St. Paul is at a premium. And in 2007, Habitat for Humanity hopes to start working with a land bank that buys raw land and focus on new production in the suburbs while preserving housing stock in the inner city. “We're at this point in time where the market has slowed down, and land prices have stabilized,” he says.
Nonetheless, builders and developers are extending their reach beyond the city of Woodbury. The next town south, Cottage Grove, is smaller, but it is here that builders may find the next opportunity in the Twin Cities' suburbs.
The city of 34,000 residents is planning to open a 4,000-acre area known as East Raven. Although 179 homes were built in Cottage Grove in 2006, city officials plan to extend sewer and utility lines to East Raven this spring in the expectation that it will be developed, according to John McCool, Cottage Grove's senior planner.
Ralph McHattie, 86, is ready to stop farming his 89 acres. His land has been optioned by Homes by Chase, and he's got “up front money” in the bank. His wife wants a one-story house to live in, and he wants to move on. While the property was supposed to close in spring 2006, nothing has happened yet. But McHattie isn't worried because he recently got more option money from the company.
“I believe Cottage Grove will still stay in the 300 to 400 home range a year,” says Fogarty who has been working with McHattie on the deal. “There is some inventory becoming available. But nothing is being done yet.”
Learn more about markets featured in this article: Los Angeles, CA.