Developed lot inventory reached a record level of 37,760 lots in February this year, but new numbers show it dropped slightly to 37,056 in June, according to MarketGraphics Research Group.
The number of
homes finished but not occupied has also crested. In February, it was at a record level of 4,353. This month, the number has dropped to 3,990.
“This market is very, very close to the bottom. Almost 70% to 80% of indicators are already at the bottom or near the bottom,” says Edsel Charles, president of MarketGraphics, which tracks the new-home market in Nashville and 21 other states.
By 2009, 15% of the Nashville market will see some shortages, he says, and by 2010, about 40% to 45% will see shortages.
“By 2011, we have a problem on our hands with the availability of lots, “ he says.
The economic environment makes it difficult to buy and hold land though and Charles says about one-fourth of the builders are really struggling with the ability to borrow money to develop land.
October 13, 2008 - Associated Press publishes
Vulture funds ready to swoop in, sweep up assets for a bargain:
NEW YORK — When financial panic sweeps Bedford Falls in the 1946 movie
It's a Wonderful Life, the villain, Mr. Potter, moves to snap up the Bailey Bros. Building and Loan, offering a fire-sale price of 50 cents on the dollar.
"I may lose a fortune," Potter says with a smirk. The picture's hero, George Bailey, knows better. "He's picking up some bargains," he tells stockholders.
That kind of bold opportunism has made capitalists rich for centuries. Now, legions of like-minded bargain-hunters stand ready to do some Potter-style shopping of their own amid the nation's financial crisis.
"Vulture" investors, as they are called, have raised tens of billions of dollars over the past year in anticipation of opportunities to scavenge distressed assets and debt at discounted prices.
Speculators are eyeing potential profits in many of the same areas now at the center of the financial mess: real estate in foreclosure-plagued Florida, high-yield commercial paper and pools of questionable mortgages.
Yet, most have hesitated to swoop in.
Instead, they have circled and watched for nearly a year as the turmoil worsened, wary about committing to anything with the financial system in chaos.
"These people have been waiting for the bottom to be reached before they plunge in, and then they take the risk of having the price drop even more," said Roy Smith, a finance professor at New York University.
The vultures have been skittish for another reason: The poorly performing mortgages at the root of the crisis were repackaged, resold, sliced apart and pooled together in so many complicated ways that even the best-trained experts have trouble understanding their value.
"There are investors who have pools of loans, and they don't know where the assets are," said Harvey Green, chief executive and president of Marcus & Millichap, a large commercial real estate investment brokerage based in Los Angeles.
Some of these factors might begin to change in the coming months as the federal government begins trying to stimulate the credit markets with its $700 billion bailout.
If it works, the private sector may be ready to pounce. Dow Jones Private Equity Analyst said Tuesday that 18 distress funds have raised $37.9 billion this year. One big player, Oaktree Capital Management, has set aside a whopping $10.6 billion to invest in distressed debt. Goldman Sachs announced last fall that it had raised $4.5 billion to invest in distress opportunities in the credit markets.
Even Lehman Brothers had been preparing a $1.25 billion fund for distressed mortgage-backed securities before filing for bankruptcy last month.
"There is much more money raised for these distressed assets than there are distressed assets themselves," said Tomasz Piskorski, assistant professor of finance at Columbia University.
Other entities have begun to mobilize in response to the crisis, such as high-powered law firms and factory-like operations designed to rehabilitate bad mortgages.