The down market has provided openings not just for the cash-ready investors at foreclosure auctions. Some big homebuilders have been positioning for an eventual recovery by buying land – although not all of those builders are based in the U.S.
Recently, for example, Henley Properties Group, which is based in South Australia and backed by Sumitomo Forestry Group, announced it has begun buying lots in the Seattle area and has taken over the operations of Sumitomo-owned Bennett Homes, based in nearby Bellevue.
The move certainly fits the buy-while-the-price-is-right strategy. Given the uncertainties of the U.S. housing market, though, the partnership with the deep-pocketed Sumitomo is critical to the feasibility of the venture. The Seattle market had an especially rough go of it during the second half of 2010, according to the S&P/Case-Shiller 20-city Index, although home sales in Washington’s King County, which includes Seattle, took less of a hit in February than sales in the rest of the country: the National Association of Realtors reported that U.S. sales in February dropped by a seasonally adjusted 9.6% from January and 2.8% from February 2010; but the Northwest Multiple Listing Service reported that King County sales were down 1.2% from January and 0.9% from February 2010.
The national median existing-home sales price, meanwhile, was $156,100 in February, down 5.2% from February 2010; the King County median was $334,000, down 10.5% from a year earlier, according to the Northwest MLS. Nationally, new-home sales declined 16.9% in February to a record-low seasonally adjusted annual rate of 250,000 units, according to Commerce Department figures released this week.
A foot in the door to the West Coast market
Henley says its bet on the Seattle area is based in part on expected population growth of about 500,000 in the region over the next 10 years, and on the regional housing market’s history of resilience during much of the downturn. Accordingly, the company plans to build 500 homes in the Puget Sound region by the end of 2012, which will add, it says, 1,600 jobs to the local economy.
As explained in a recent Seattle Times story, Henley is managing construction of 15 to 20 homes a month on subdivisions formerly owned by Bennett Homes, and will soon start building on a 54-lot subdivision in the Seattle suburb of Kent that it purchased in October for $5.5 million from developer Yarrow Bay Communities. That project will feature model homes showcasing 12 Henley designs, the story notes. The company says it is investing about $100 million in its U.S.-based enterprise.
Henley seems to be gambling less on whether the prices it is paying for assets are as low as they’ll go and more on how long it will take the housing market to find its way to steady recovery. Eric Landry, an associate director with Morningstar, declines to offer a long-term prediction, but last week he did suggest that prices likely will climb this spring, and that the climb will be based on more than the warm-weather bounce that typically brings foot traffic into for-sale properties.
Landry notes, for instance, that while foreclosures will continue to feature heavily in the mix of offerings, prices for the rest of the housing inventory have by now been adjusted accordingly. Too, he says, many foreclosed homes “sit in poor locations, are too big, and feature amenities that are uncompetitive in today’s market. For these reasons, we don’t see any reason the market can’t get back onto its feet well before the last foreclosure is processed.”
Today, Landry adds, “we think balance may be slowly returning after being tilted heavily in favor of weaker home prices for more than four years. Does this mean we are likely to enjoy uninterrupted increasing prices for years to come? No, but it does mean homeowners are unlikely to have to endure anything resembling the past five years anytime soon.”
Fine Homebuilding Recommended Products
Fine Homebuilding receives a commission for items purchased through links on this site, including Amazon Associates and other affiliate advertising programs.
8067 All-Weather Flashing Tape
Reliable Crimp Connectors
Affordable IR Camera
The Elliston model offered in Australia by homebuilder Henley Properties Group, which has begun purchasing land in the Seattle area as it begins expansion into the U.S. This version of the Elliston features what the builder calls a “lantern façade.”
