Summary
Brookfield's bet on the bottom of the market is an excellent strategy to tie up distressed lots before the housing market starts it's upward trend. The real question is where lot prices are going to go when the existing market is bought, and with no new lots in the pipeline, how high can prices go?
Analysis
At this point, lot prices are a real bargain, but supply and demand dictate that prices will be going up. Based on the southeast USA it appears that Brookfield will have no issues using their 4 billion and capitalizing on the market at today's distressed prices.
Builders will have to change their lot purchase strategies based on new bank borrowing guidelines, but this is not a bad thing. Builder's were forced to make unreasonable lot takedowns or buy lots outright without presales. Business dictates that lots should not be purchased until there is a buyer for that lot and home. Brookfield will be in control of thousands of lots and be able to dictate prices, absorptions and builder selection to compliment their offering. Not a bad strategy if you have the funds.
The number of lots on the ground are sufficient at this point, however Brookfield needs to be aware of the time delays when dealing with the government agencies that control those distressed lots.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
