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Entering 2024, tight lot supply contributed to lot availability ranking as a top concern for home builders, according to survey data from the NAHB. Entering the summer months, many builders reported the land market getting more competitive with land prices rising relative to recent months. With the challenges presented from the land market, builders have begun searching for ways to mitigate challenges, such as establishing new strategic partnerships and cultivating developer relationships to facilitate growth.

To better understand how the market is shifting from the perspective of land developers, Builder spoke with John Neal, president of south Florida land planning and development organization Neal Land & Neighborhoods. Neal highlights how the current land market, the value of builder-developer relationships, and how land development “is more of a specialty than it ever has been.”

How would you characterize the current land market?
Speaking for Florida, we are still drastically underproducing lots and therefore underproducing homes for the people who want to buy in this state. Adjusting to demand, if it takes three years to bring a project from concept to sales, adjusting to that new demand is difficult. Builders, in particular, are relying more on land developers like Neal Land to have a deep pipeline. We have a pipeline of about 12,000 paper lots which we try to bring on just in time so that we produce lots in the same market that we sell lots.

Are you seeing more builders interested in entering land development partnerships?
[Builders] are coming to us because they are moving to a more land light position. I think that they can be more competitive in that environment. Plenty of builders can build subdivisions where they have 140 homes, 200 homes, and they can produce that. But for longer-term projects where they can see 200 homes or 150 homes a year for the next 10 years, they have to have the discipline of being able to maintain and adjust. I think they do better when they work with a land developer like ourselves.

How do you see the value of partnering with a land developer compared to builders electing to self-develop land?
We really focus on the horizontal. Mostly we have a vision for how we want to live and how people want to live. I think home builders are particularly focused on data for their sales. Things like price, commute, and schools. Things they can communicate quickly in a buying session. I think a land developer, particularly Neal Land, focuses more on emotive elements of our communities. Things like health, safety, schools, friendship, and lifestyle. A school just doesn’t pop up, it is something that has to be planned. We as a land developer spend a lot of time working with local government and school boards. We say, ‘We’re selling 87% to families, you are going to need a new elementary school here in the future.’ We work with them to deliver that in time. Making land parcels available to them should they choose to do so. Health is multifold. It gives people opportunities to get out on trails, we plan hospitals and healthcare and medical offices. Safety and lifestyle - which includes commercial and active enjoyment of facilities and other elements. I’m not saying that home builders don’t do that, but we particularly focus on that and put a lot of effort, thought, design, and consideration into those elements.

What is your outlook for the near-term future of the land market and land development?
Looking at Zonda and other consultants and our observation, we think there will be an inventory correction. Even an inventory correction in home building as far as the amount of spec homes on the market, even if that adjusts, we are still at an undersupply of lots. So, at least the position of Neal Land is to continue building lots without pause. Which is also beneficial to home builders, particularly large home builders who don’t want to carry those lots on their balance sheet year to year. As with all potential recessions or reductions in the amount of homes which are sold, there will be some winners and some losers.

Land development and land development regulation and the timing of production of lots has just…it’s not a groundbreaking idea that it’s getting harder and harder. But it is not getting easier any time soon. We talk about land development as a specialty. It just is, because builders need to focus so much on product. Building homes has not gotten any easier either. We used to be able to put a roof and windows and an air conditioner on a house and sell an attainable home, but the energy [regulations], the standards for roofing, the hurricane protected windows, it has become a moving target. I think there is an advantage with any builder who makes a relationship with a land developer who focuses on all the horizontal elements so the builder can focus on the margins and pricing and the value proposition of the vertical product of the home itself. That includes look and design and technology and roof pitch and colors and all sorts of things.

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