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Like most public builders, Lennar Corp. is back in the land game, a sign of confidence for a sector limping through its worst downturn in generations.

But the game has changed since the heady days of the boom when sky-high price tags and out-of-the-way locales didn’t seem to matter. Now builders are seeking deals, snapping up prime lots ready for building with streets, sewers and other improvements already in place. That reduces construction costs and boosts margins, key as builders struggle to turn a profit.

In Homestead, Fla.-located in hard-hit Miami-Dade county-Lennar recently snapped up 107 home sites for $3,000, according to an SEC filing Tuesday. In boom-to-bust San Bernardino, Calif., 38 sites commanded $28,000. San Francisco had the priciest parcels; 33 sites went for $139,000, according to the filing. Of course, builders still have lots of land. Lennar alone owns 78,000 home sites, according to the filing.

That might leave one wondering: Why buy more?
 
During the housing frenzy, builders weren’t all that picky, taking almost anything that came along. But the downturn soured many buyers’ appetites for long, traffic-heavy commutes, making locations near urban centers and public transportation more valuable.

Most builders have sold their less-desirable land and put projects on hold until the market returns. Ryland, for one, says it has land in Phoenix, one of the best known bubble markets, but isn’t actively selling for now. Industry giant Lennar wasn’t specific about its purchases, saying only they were “well located.”

With only so many choice lots to go around, builders are getting aggressive and paying cash if necessary. Bidding wars have resumed, but some builders say they’ve learned their lesson and won’t overpay.

Last week, luxury builder Toll Bros. said it came in eighth place in a California bid. “We may not be the swiftest or the brightest, but after 40-some-odd years in the business, I would have hoped that we would have come closer than eighth,” Chairman and Chief Executive Robert Toll said in a quarterly preview call. “But on the basis of the current markets, even with a little inflation thrown in, we couldn’t see to get ourselves any closer than eighth to the winning lines.”
Reported by Wall Street Journal (Nov. 17, 2009)