For months now, land owners, developers, and single-family and multifamily builders have talked about the severe drop-off in land sales. New numbers from Real Capital Analytics back those assertions--the New York-based real estate research firm says that sales have fallen off drastically, nearly 75 percent to date this year.

From January through August of 2008, land sales totaled $7.1 billion. During the same period last year, $27.2 billion in land was sold. In the first three quarters of 2006, that number was $16.4 billion.

"It's not just sales, but it's pricing as well," says Jack McCabe, CEO of McCabe Research and Consulting, a real estate research and consulting firm based in Deerfield Beach, Fla. "The parcels that are being sold are incredibly below what they were a few years ago. We're talking 20 [cents] to 40 cents on the dollar."

Fort Worth, Texas-based D.R. Horton's $7.8 million sale of 2,000 residential lots in Southern California's Inland Empire as well as its $4.4 million sale of a 4-acre parcel in Escondido, near San Diego, proves McCabe's point. In San Diego, The Wall Street Journal reported that the builder got 25 percent of what it paid for the property in 2005, according to the county assessor. In the Inland Empire deal, the Journal reported that one bidder estimates Horton paid $110 million for the land before spending money "to prepare the property for development by grading and installing infrastructure such as sewers."

For land buyers and sellers to come together, these kinds of discounts may need to become more common. "There's a great deal of uncertainty about what land is worth today because there are few transactions actually taking place," says David J. Neithercut, president and CEO of Equity Residential.

Of course, those sales can't happen without available capital. For the past year, capital has been difficult for developers and builders to secure. With the financial meltdown of the past few weeks, it's now next to impossible for many private firms to find any sort of debt. "There also has to be some capital availability [for land transactions to happen]," Neithercut says.

Right now, it seems there are only a limited number of groups with the capital available to even pursue land deals. "The only buyers out there are hedge funds and private equity [firms] that are planning on land banking," McCabe says.

However, The Washington Post reported this week that the hedge fund industry suffered its worst losses ever in September and that investor withdrawals could lead to the collapse of major funds. If that happens, hedge funds may no longer be in the land game either.

That being said, industry observers say if you're a small builder or developer with cash or well heeled partners, the price for land may be just right. "It's great time to buy land," says Brian O'Neill, founder and chairman of King of Prussia, Pa.-based O'Neill Properties Group, a multifamily builder and owner. "Is it difficult? Yeah. But we're sticking with it because the price is right."

Les Shaver is a senior editor at Multifamily Executive and Developer magazines.

DIRT DIVE: Annual land sales have plummeted in 2008, according to New York-based research firm Real Capital Analytics. Through August, sales were off nearly 75 percent, versus the same period in 2007.
Year                        Dollar Volume
$20.94 billion           (2005)
$25.95 billion           (2006)
$37.07 billion           (2007)
$7.17 billion             (2008 to date) 

Learn more about markets featured in this article: Los Angeles, CA, Dallas, TX.