Investing in Land

A story posted to the Real Estate Channel, a self-described “Internet News & Property Information Network that distributes relevant and timely real estate news stories, market reports, expert industry opinions and property video profiles to real estate audiences – worldwide” has put a spotlight on the work of Walton International.

Walton, as readers of this blog know, is a Calgary-based raw land investment company.

According to REC, Walton’s “most recent transaction covers additional acreage for the 1,375-acre master planned Cottonwood project in Scottsdale, AZ.”  This is one of a continuing string of such announcements from the company that seem to paint a brighter economic picture than we see elsewhere.

In a recent report in the Phoenix Business Journal, people who ought to know say we are touching the bottom of a bad economy and should now start to look up.  And when investors cast their gaze in that direction, they ought to see land.

Sure, people like Land Advisors Organization CEO Greg Vogel, Arizona State business school real estate professor Karl Guntermann and Carter Froelich, managing principal of a real estate consulting firm are not with0ut a point-of-view.  But the pieces are starting to fall into place.

It was Vogel, in fact, who noted the “re-emerging investment market” in Arizona.  He added that “Investors are returning to Phoenix and snatching up undeveloped land at prices not seen for at least a decade.”  There is data, too.  As the decline in home prices slows, the Wall Street Journal reports that new home sales are up 11 percent.

This is not about repeating the mistake of what former Fed Chairman Alan Greenspan called “irrational exhuberance.”  There is too much evidence that says we still have miles to go.  The Associated Press just confirmed that home foreclosures in the first half of 2009 rose 15 percent.

But the signs are pointing up and that means they are pointing at the value of land.

At the end of last week, two reports converged to add emphasis to the argument that the economy may be looking up.

First came word from the National Association of Homebuilders that the confidence level of the people who build the homes we live in had moved higher than it has been since last year.  The news is tempered by a still tight credit market and continued foreclosures, but good metrics are a path to the rebound.

Second came just some of that sort of news.  In the U.S., housing starts are up for the first time since last year.  The Commerce Department noted that “(s)tarts of single-family homes rose 14.4% last month to 470,000, the highest level since October. This is the fourth straight increase…”

These two elements of economic activity are at the end of a long line of events that begin with identifying, acquiring and developing the land beneath them.  And there are early signs that the land market is growing more active, too.

It will be best to keep a close eye on just what develops.