KB Home made a big splash in the fall in the highly competitive Washington, D.C., area when it rode into town and grabbed up one of the last remaining large parcels in the affluent Montgomery County, Md., suburbs. But the question remains: What kind of ripple effect will it have on the nation's eighth largest market in terms of new home sales?

Observers worry that the millions that KB—the lead builder in the 2,000-home Crown Farm property in relatively close-in Gaithersburg, Md.—paid for the 180-acre parcel will have the greatest impact on market share. But if anything, the deal is more likely to mean substantially higher land prices than it is a changing of the guard.

No single source keeps tabs on land costs in the region, either for raw ground or finished lots. So no one knows for sure whether the money KB paid for the old dairy farm was a record. The deal for the unzoned, unimproved property was reported at $137 million. But “additional installment payments” will eventually push the price to $205 million, says publisher Jim Troy, whose Maryland Newsletters follows the development action in Montgomery, Prince George's, Howard, and Anne Arundel counties. Another unaffiliated company, Virginia Newsletters, covers D.C. and five Northern Virginia counties.

NATIONAL PLAYER: KB Home scooped up 180 acres in Montgomery County, Md., just outside of Washington, D.C. The builder reportedly paid $205 million for the property. Troy says the transaction took his breath away—until Lennar upped the ante with a year-ending $200 million deal for an 1,877-lot “assemblage” in Prince George's County (see “Starts” story on page TK). It's one thing to pay top dollar for a jewel like Crown, which is located just off the I-270 corridor at the entrance to the future Intercounty Connector and possible Outer Beltway. But ground in Price George's, the last frontier as far as the close-in suburbs go, has traditionally gone for a much lower price.

Troy isn't sure whether the money the nationals—not the city's new baseball team, but big builders—are tossing around is outrageous or simply normal. “It's getting to the point that what KB paid is the next logical step,” he says. “It's all part of a steady escalation.”

At the same time, though, he wonders when—or if—the land-grabbers will eventually fall from grace. “Honestly,” the watchdog says, “the numbers are moving so much so quickly that it's hard even for me to keep up.”

PUSHING THE ENVELOPE John Slidell, executive vice president of the Bozzuto Group, which builds for-sale houses in the Capital area and apartments from the Mid-Atlantic states up to New England, is one regional builder who thinks the majors may be pushing the envelop too far. KB “paid more than anybody, even any of the other public companies,” for the old farm, Slidell says. “They bought their way into the market, and I'm sure that from now on, they are going to be invited to the table to bid on other pieces.”

As Slidell sees it, KB might have overpaid, especially as the record housing boom starts to wind down. “They seem to be saying it doesn't really matter whether it's a rainy day or a sunny day, they've got the money to do it,” he says. “It's really, really hard to predict what's going to happen, but if a recession hits, they could get into trouble. It's happened before—to a lot of people.”

Learn more about markets featured in this article: Washington, DC.