Inland Empire land values down by 60% from peak

For the past week or so I've been compiling information on residential land opportunities in the Inland Empire for a large investor with billions of dollars under management.

Firstly, I'd like to single out Eric Christianson at The Hoffman Company (echristianson@hoffmanland.com) for assisting me in providing a summary of current opportunities and samples of recent deals to this client in order to get to the next step, which is identifying the best opportunities for him and his fund.

In fact, Eric was the only land broker who has been responsive to my inquiries -- I called senior principals at two other major brokerages doing business in the Inland Empire explaining what I was trying to do and the nature of my client and have yet to hear anything at all even after several days have gone by. With potential six-figure commissions at stake, I'm very surprised at this level of flakiness.

But I digress.

According to the latest stats from Hoffman, land values for a typical 7,200-square-foot finished lot in Riverside County continued to fall by 11.5% during the beginning of the first quarter of 2009 to an average of $72,000, which range from just $45,000 to $50,000 in outlying areas such as San Jacinto, Hemet and Perris to $110,000 in the Dairylands and $125,000 in Corona. Since the market peak in the fourth quarter of 2005, finished lot values in Riverside COunty have fallen by 63%, ranging from declines in the low-50% range in Corona and Temecula to nearly 70% or more in Menifee Valley, Beaumont, Perris and Elsinore (east of the I-15).

In San Bernardino County, the pain has only been slightly less, with land values falling by 7% since the fourth quarter of 2008 to an average of $93,059 and ranging from $35,000 to $45,000 in the high desert areas to $160,000 in Etiwanda and $175,000 in Chino Hills. Since the peak, land values have now fallen by nearly 60%, ranging from the low- to mid-50% range in Chino Hills, Upland, Ontario and Loma Linda to nearly 70% in Adelanto and Yucaipa.

In general, finished lots in the Inland Empire can now be had for about half of replacement cost in outlying markets such as the high desert or San Jacinto/Hemet/Perris and Beaumont/Banning. At the same time, raw land with no entitlements is selling in many place for close to its value as agricultural land.

Although there is still a chasm between what banks and builders think their land is worth and what sellers are bidding, I think we'll be getting to parity sooner rather than later, especially as FDIC-controlled banks start moving on getting these foreclosures off of their balance sheets. From what Eric tells me, the larger banks are currently being more realistic, as smaller banks don't have the resources to withstand haircuts of 40% to 70%.

Hoffman's Web site should have the latest stats posted any day now, but if you're in a huge hurry, send Eric an email.