A proliferation of data and new data analysis methods are changing the way builders buy, sell and develop vacant land, according to experts, and builders are cautiously optimistic that easier credit and more flexibility will help the new homes market rebound in 2015.

Several groups of real estate experts, executives of large residential builders and land advisors spoke this week at a building and building products symposium held at Barclay’s New York City headquarters. The state of the land market – a key factor in determining what kinds of housing gets built, where and at what price – was a common theme throughout the various discussions.

“The real opportunity of land goes beyond the land itself,” said Steve Benson, CEO of Phoenix-based land-banking and advisory firm Community Development Capital Group. “Builders are looking at land as much more than a piece of dirt now.”

Landowners and buyers alike are using multiple data sources to examine what is being built in other areas, which designs work best for certain parcels and which builders are best suited to maximize certain features of a given piece of land, Benson said. Rather than plowing ahead and building a certain set of homes on a given piece of land, developers today may be more apt to sell their land to a different type of developer rather than undergo a project themselves, or choose to build a different type of home than they normally would, based on data.

“Real estate has always been about location, location, location,” Benson said. “But with land especially, it’s future location, future location, future location. Today, data helps inform that equation for builders much more than in the past.”

High land costs, and perhaps unrealistic value assessments by landowners, are a big reason why developers are having difficulty developing more entry-level, lower-cost communities and homes, said Greg Vogel, CEO and founder of Land Advisors Organization, a Scottsdale, Ariz.-based land brokerage.

Developable tracts of land appreciated very quickly in value during 2012 and 2013 in anticipation of a building boom in 2014 that largely has yet to materialize, Vogel said, calling 2014 “a dud” compared to expectations for new development. But strong recent years have convinced today’s landowners – tomorrow’s land sellers – that their land may be worth more than it is.

“[Land] sellers are very sticky on the up,” Vogel said, in reference to land price appreciation. “We’ll offer a price, and they’ll tell us, ‘See you next year.’”

As a result, builders are increasingly forced to put higher-priced homes on the developable lots they do control, in order to recoup their higher land-acquisition costs. This will create challenges for larger builders looking to cater to lower-end and first-time buyers, who are expected to enter the market in higher numbers in coming years as younger buyers, in particular, get married and start families. Most observers agreed that it’s just a question of time until we see millennial demand pick up.

“If the entry-level buyer does come back, I’m not sure there will be a lot of opportunities to develop those kinds of communities right away,” Vogel said.

Price Vs. Pace Vs. Margin

Beyond the kinds of large, multi-acre tracts on the edge of cities and towns favored by big, publicly traded homebuilding companies, smaller in-fill lots located in downtowns and established communities also represent opportunities for builders, particularly smaller, private developers. Private developers can build higher-density projects with a smaller overall number of units on infill sites, Vogel said, though these homes cannot compete on price with those built by larger firms. But what they lack in price strength, these developments can make up for in design flexibility.

“Private firms excel at being able to simply hire an architect and ask, ‘What can you do with this site?’” Vogel said. “And with those kinds of projects, they don’t have to worry about competing with the bigger builder down the street or on the other side of town.”

In recent years, data indicate that builders seem content to trade high sales volumes in exchange for lower volumes, but higher sales prices. Vogel said the way to get higher sales volume is simply to have more speculatively built homes completed and available for sale in the first place.

“If you have a house ready to go, you’ll get a higher pace of sales,” Vogel said.

But the key question builders ask is not monthly sales pace versus final sales prices, Benson said, but instead is sales price versus profit margin at a given pace. If a builder is selling three homes per month, then that builder knows that overhead costs will total a certain amount at that pace. If they wanted to adjust the pace of sales to six homes per month, they need to adjust their overhead costs and maximize their efficiencies accordingly, which many may be unwilling to do if they’re comfortable at a given margin.

“Plenty of Runway”

In order to begin building more homes, the one thing builders would like to see more than anything else – more than lower land costs and higher wages among buyers – is simply more economic confidence among potential buyers, said John Burns, CEO of John Burns Real Estate Consulting. According to a recent Burns survey, roughly one-third of builders said more confidence topped their 2015 wish list.

That bodes well for 2015 and beyond, as recent Zillow research indicates housing confidence, in particular, is on its way up, especially among younger renters who may be looking to buy in the next few years.

But not all demand for new homes is expected to come from younger, entry-level and first-time homebuyers in coming months and years.

Douglas Yearley, CEO of Pennsylvania-based residential construction firm Toll Brothers, said there are plenty of existing homeowners looking to move up into a larger or nicer home. The typical home built by Toll Brothers sells for roughly $700,000, Yearley said, certainly on the higher end of the price spectrum but not outrageously so.

“There’s plenty of runway left in what we do,” Yearley said.

Builders were also hopeful that slowly easing access to mortgage credit would convince more would-be buyers to enter the market. Steve Hilton, CEO of Scottsdale-based homebuilder Meritage Homes Corp., said there is currently more demand for new homes than his company is able to qualify, an indication that if credit conditions were looser more homes could be sold.

Hilton also indicated there could be a kind of chicken or egg problem preventing the credit market from easing further, as borrowers with lower credit sometimes don’t apply in the first place.

“There’s a kind of perception gap we’re seeing,” Hilton said. “We see a lot of people with a 680 credit score, which is historically pretty good, thinking that they can’t get a loan. So they don’t apply in the first place. There’s a lot of good loans out there that aren’t getting made.”