By Robbie Whelan | The Wall Street Journal
A year ago, Nate Nathan, an Arizona land broker, struggled in vain to sell several hundred home sites in Vistancia, a new-home community about 15 miles from downtown Phoenix. He listed the lots for $54,000 apiece, but no buyers would offer more than $45,000.
All that changed over the past year. As Phoenix home prices picked up, builders suddenly started coming to Mr. Nathan and making ever-higher offers. This year, he has sold 850 lots, including 250 lots for $96,000 apiece in the past 45 days.
“The world has just woken up and said, ‘We need land!’ ” Mr. Nathan said.
What is happening in Phoenix is happening in real-estate markets all over the U.S. The rebounding housing market has sparked a sharp rise in land prices, creating big profits for land investors but putting pressure on builders to further increase the price of new homes.
Land values across the U.S. rose on average 13% in 2012, the first annual gain since 2005, according to estimates in a March report by Zelman & Associates, a housing consultancy. The increase was fueled primarily by growing demand among builders for finished lots, or ready-to-build home sites with roads, sewage lines, electrical-power hookups and other infrastructure in place.
“There’s no question the land market has gotten heated of late,” said Richard Dugas, chief executive of PulteGroup Inc., PHM +0.36% the nation’s second-largest home builder by volume, on the company’s most-recent earnings conference call. “In some markets it’s a real challenge to get land deals to pencil.”
