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  • Randall Benton /

    An earthmover grades land in west Roseville this week, preparing for residential development on a Meritage Homes site. Builders across the region are investing in the development of raw land by paving streets, laying utility cables and grading lots.

  • Randall Benton /

    Alfredo Mercado of Teichert Construction prepares a Meritage Homes site in west Roseville. Such activity hasn't happened much in the region in recent years.

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Home builders resume land development in Sacramento region

Published: Saturday, Jul. 13, 2013 - 12:00 am | Page 1A
Last Modified: Thursday, Jul. 18, 2013 - 12:57 pm

Big yellow earthmovers with tires taller than a man rumbled across the parched grassland of west Roseville this week, readying the ground for a bumper crop of hundreds of new homes.

The sight of construction equipment breaking up fields was common in last decade's housing boom but nearly vanished the past seven years. Even after the housing market started to recover last year, many home builders were willing to build only on finished lots. They weren't ready to spend the millions of dollars it takes to break ground, pave streets and lay sewer pipe.

Now, with home building companies growing more confident in the resurgent housing market, land development activity is back in the suburban areas of Roseville, Lincoln, Elk Grove and El Dorado Hills. Experts call it a major step in the evolution of the housing recovery.

"The fact that builders are willing to invest in the development of infrastructure is an incredibly strong signal to the market that we feel housing is back," said Chris Cady, president of KB Home's Central California division.

In April, KB bought 64 acres of former ranch land slated for 309 homes on the western fringe of suburban Roseville. The company's contractors started work there in recent days.

Cady said builders will typically spend about $50,000 per lot on infrastructure costs before any houses are built. Multiply that by 300, he said, and it pencils out to about $15 million.

"If you say 'I'm going to write a $15 million check,' you're feeling pretty confident," he said.

Meritage Homes bought a neighboring parcel in west Roseville where the lush green landscaping of Pleasant Grove Boulevard abuts a sea of brown grass and barbed wire. The company is planning to build 224 houses on its 45 acres there.

Barry Grant, Meritage's Northern California division president, said the reason for the new site work is simple: the supply of ready-to-build lots dried up. New home prices in the region have risen by double-digit percentages in the past year. Sales have increased, but the market has been crimped by lack of inventory.

Builders stopped developing new land for housing in the depths of the downturn, then were caught off guard by the speed of the market recovery, Grant said. "None of us ever anticipated the resiliency of the market."

Meritage is also breaking ground in nearby Lincoln, where it plans to build 450 homes. KB is installing underground utility cables in Elk Grove. And Standard Pacific is planning to open a handful of new communities – to be built on what's now raw ground – in Roseville, Elk Grove, El Dorado Hills and Granite Bay.

Standard Pacific, which focuses on more expensive houses in the move-up category, is "trying to look for high-quality locations where buyers really want to be," said Jon Nicholson, head of the builder's Sacramento-Central Valley division.

Those locations in Placer and El Dorado counties, and Elk Grove, have become hot commodities lately, said veteran land appraiser David Jarrette.

During the recession, builders holding large amounts of land found themselves in financial trouble, and some were forced under. Now, though, land is re-emerging as a profit center for those who have it to sell.

KB and Meritage declined to disclose details of their purchase in west Roseville. But Jarrette said the big home builders paid a combined $54 million for land that an El Dorado Hills investment firm, Westland Capital Partners, paid just $8 million for last year.

"I've been working in this town since '76 and never saw a deal appreciate that much," he said.

The Sacramento region contains raw land approved for tens of thousands of homes, so the return of the earthmovers eventually could result in the resumption of mass construction.

Jarrette said land sales in west Roseville – one of the region's top building sites right now – have leaped in the last few months.

The area's specific plan includes nearly 8,800 single and multi-family units on 3,150 acres – much of it still grassland. At buildout, the area is expected to house more than 22,000 residents.

Another area deemed ripe for land development is the dry rolling ranchland south of Highway 50 in Folsom. That, too, will require major investments in roads, utilities and other basic infrastructure.

Plans there call for 10,000 homes on 3,500 acres annexed by the city last year.

In May, the New Home Co. bought 431 acres in the Folsom growth area south of Highway 50 from a partnership controlled by developer Angelo K. Tsakopoulos.

The company plans to build 900 homes, with site preparation expected to start next year.

Jarrette said he has concluded that New Home, which did not disclose a purchase price, paid $30 million for the land.

That too, he said, was "a big price," but the deal involved large lots for upscale homes in a prime hillside location.

With a shortage of lots ready to take to the next stage, home builders are eager not to "miss the market," he said. That's why land sales – and a renewed willingness to engage in expensive land development – have taken off.

"My term would be warp speed," Jarrette said. "They went from here to there just like that."

Call The Bee's Hudson Sangree, (916) 321-1191.

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