Stephen J. Ferrandi is in an enviable position: He's got the gold - and he knows it.
The gold in this case are the large land parcels the real estate agent is selling for 25 clients.
Typically, his clients are farmers who are selling land that's been in their families for generations.
And its Ferrandi's job in the Columbia office of KLNB Inc., a commercial real estate brokerage, to find a developer with the deepest pockets possible.
But in an era of high builder demand and short land supply, even Ferrandi has trouble comprehending the dollars being thrown at ever scarcer properties suitable for housing developments.
"I come in, do my analysis, do my spreadsheets and do what I need to do," Ferrandi said, figuring "this property should go for `X,' and 90 percent of the bidders are right where I thought it should be.
"But there are 10 percent of the people who are double that. And you say, `How can that be?' But you see it all the time."
Dwindling supplies of land are bringing top dollar. And national publicly traded companies are now using their financial muscle to buy land, squeezing out local builders and developers.
The mega-builders, who complete thousands of homes nationally, are even willing to take a loss on the land because they can make a profit in constructing a home or in offering mortgages and title searches.
"In the last two or three years, I have just seen this unbelievable thirst for land," Ferrandi said. "The publicly traded companies, they have to feed the machine. And they are gobbling up as many lots as they can take down.
"And it is forming some really interesting dynamics, one of which is that independent land developers, who used to do small-lot infill subdivisions, can't compete in the marketplace anymore. They absolutely cannot compete in the marketplace.
"If you have what they are looking for, the national homebuilders will throw money at the property."
During the last five years, most builders and developers acknowledge, there has been a squeeze in the amount of land in the Baltimore metropolitan area available for development.
The scarcity is blamed in part on land-use policies that limit the amount of land available for development. These include smart- and slow-growth regulations and preservation of agricultural land.
The scarcity also is being caused by a boom in the real estate market caused by a healthy state economy and low mortgage rates.
Buyers in the last three years have seen prices for new homes - single-family, townhouse or condominium - spiral upward as demand outstripped supply.
Although sales of new homes in the Baltimore metro area for the first quarter are down 19 percent from the corresponding period last year, builders aren't fazed. If they had more homes to sell, the sales statistics would be high.
"I still see it as a strong market that is just plagued by availability problems," said Anna Pitheon, a consultant for the Meyers Group, a Washington firm that tracks and analyzes new-home sales.
"If sales were stronger in Baltimore and Howard counties, compared with where they were three years ago, the market wouldn't be trading down, it would actually be increasing."
The gradual narrowing of the land pipeline can be seen in the decline in the number of new housing developments.
According to the Meyers Group, there are 309 housing developments for buyers to visit in the Baltimore metro area, down from 420 at the end of the first quarter of 2000, a 26 percent drop. It's even more significant when comparing it with 1998, when there were 494 such communities, a 37 percent decline.
High deposit demanded
In less hectic times, builders could purchase land on what is called a "take-down schedule." After putting down a small deposit on the land, a buyer would work out a house-building schedule with a developer, perhaps building only three or four homes, to minimize the risk.
"Five years ago, we would put up a very minimum deposit and we would purchase a model lot, and on a quarterly basis a minimum number of lots would have to be purchased to maintain your option," said Rick Kunkle, president of Patriot Homes in Howard County.
"Now, the deposit requirements have increased significantly, so you might have to put up 5 percent or 10 percent of the purchase price, and secondly, we might have to buy 10 lots up front instead of one."
Ferrandi, the real estate agent who represents sellers of large land parcels, said that if a builder wants to take out an option on the land, he expects him to pay a nonrefundable cash deposit equal to 10 percent of the total purchase - a demand he couldn't have made five years ago. At settlement, the builder pays the remaining 90 percent.
"Right now there is just demand and supply forces in effect, and the supply will not equal the demand," Kunkle said.
"Traditionally, for every 1.3 new jobs created, whether it is Maryland, or a particular county, there has been one new house built.
