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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (31425)	5/17/2005 10:12:30 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

The value of unimproved land suffers more than improved lots due to discounting (the time value of money). Builders stuck with high cost lots in a downturn need to sell them off at a loss right away before the loss gets worse. But they can be sold immediately because they are in a developed area with everything they need to become a house. With a sudden surplus of unbuilt improved lots to soak up what little building that occurs in a downturn, why would anyone want a property that needs grading, roads, and utilities? Properties without utilities or improvements take the biggest hit, the 95% I mentioned. These properties were priced based on what developers were paying for parcels like these to put through their sausage factory. Once you have a downturn, no developer will be interested in this type of undeveloped property for perhaps five or ten years at best. Suddenly all you have is a horse pasture with a very distant prospect of being anything else. On the other hand, if there was little prospect of your unimproved land being turned into homes during the boom, the price of that unimproved land will obviously be little affected by the bust in home prices. .