Home builders to focus on land acquisitions

NEW YORK (Reuters) - Large U.S. homebuilders are circling like vultures waiting for their distressed colleagues to go bankrupt before snapping up the choicer properties, two chief executives said earlier this week.

"I hate to feel like a vulture, but in every cycle we have typically bought land from other builders that have gone in bankruptcy," Ara Hovnanian, chief executive of Hovnanian Enterprises Inc (HOV.N: Quote, Profile, Research), said at the Reuters Housing Summit in New York.

"We have already looked at parcels of several other builders in bankruptcy."

Tom Eggleston, head of C.P. Morgan Communities, expected half of the National Association of Home Builders' 75,000 members to be in financial distress within three years.

Some thought such distress would make troubled builders candidates for merger activity, but home builders say they are likely to focus on efficiency within their own organization, and would not want to buy a builder that got into trouble.

"Because our method of operating is so different from other builders, we'll train a young team to get in place and start up in a new market," Eggleston said, adding that he would like to look for deals on distressed land opportunities.

"Prices are depressed and the opportunity is there to buy land at unheard of prices," Eggleston said.

Several home builders are suffering from the impact of poorly timed acquisitions made at the height of the housing cycle, so buying land through a bankruptcy auction or from a distressed owner could be the safest way to expand in the downturn, the CEOs said.

"We haven't purchased any (distressed land) yet, but we certainly will before this cycle is over," Hovnanian said.