Who are the buyers of land today?

Yesterday I spent the day in Orange County with G.U. Krueger, most recently the Chief Economist with Institutional Housing Partners, an adviser to CalPers. During the course of the day we met with a series of land brokers and Wall Street analysts in town to see how we might assist in their due diligence efforts, and this is pretty much where the market is today:

1. There are 3 types of buyers: builders, wholesalers and speculators, and each group is looking for different-sized deals in specific markets.

2. Most deals are small, often consisting of groups of finished lots (30-150) that wholesalers (often families or groups of friends) can then flip to builders when the market rebounds; given the past discounts on inventory, many builders are already starting to run out of such land but still prefer small, rolling take-downs that many banks aren't set up to provide.

3. Institutional money remains on the sidelines, waiting for other larger deals to happen before they jump in. Some hedge funds with longer time horizons (up to 10 years) are looking for more speculative plays, often in tertiary markets that could a higher reward given the greater risks, but these are still anecdotal.

4. Some opportunistic farmers are buying back land at agricultural values after having sold the same parcels to builders at inflated (residential land) prices.

Given some strands of good news, there are lots of buyers kicking tires, but deal flow is still very low due to sellers not yet capitulating on price. But as the FDIC continues to take over banks and put pressure on those still operating, you may see deal flow from banks increase over the next year as they're forced to get these non-performing assets off of their balance sheets.