You can add another problem to the litany of housing woes: home builders are exiting their contracts to buy land.
Already the home market is beset by homeowners walking away from mortgages, and now the home builders are joining the party, The Wall Street Journal reports.
The builders jumped into land purchases earlier this year amid speculation that the housing market had bottomed.
But with home sales plunging again, the builders are having second thoughts.
Standard Pacific is one of them. Earlier in the summer, it signed a letter of intent to purchase an option on 451 lots in Southern California’s Inland Empire. But last month, it had a change of heart.
"The market is definitely doing worse now than at the beginning of the year," Standard Pacific CEO Ken Campbell told The Journal.
"It's a weaker home-sale environment than people had expected, which means land is less valuable."
Land brokers say builders D.R. Horton, M.D.C. Holdings and KB Home also walked away from deals.
Existing home sales dropped 27 percent in July from June to at least an 11-year low.
But Yale housing expert Robert Shiller, co-founder of the S&P/Case-Shiller Home Price Index, warns against getting too pessimistic.
“Let’s not overreact to these latest sales numbers,” Shiller, told Bloomberg. “July is an anomalous month.”
That’s because June 30 was the original closing deadline for homebuyers to receive an $8,000 tax credit.
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