By Helen Chernikoff

NEW YORK (Reuters) - Homebuilders in the UnitedStates, who lost hundreds of millions of dollars when land theybought during the housing boom lost value after the bust, arebidding up lots despite new softness in the market.

Home sales have slumped since the federal home buyer taxcredit expired in April. In July, new home sales were at theirslowest pace since the Commerce Department started trackingthem in 1963.

But builders keep restocking land inventories because theyfear shortages and because they see rivals doing it, saidindustry consultant John Burns, who has been advising them to"back off for now."

If demand for new homes does not revive, these lotpurchases could jeopardize profitability into 2012, when theywould build on land they are currently buying.

Falling home prices would mean they are overpaying today,especially because they are increasingly focused on the samemarkets, where they are cannibalizing each other's business.

The economy softened more than anybody anticipated, Burnssaid. He and the rest of the industry is well aware economistswould have builders stop altogether rather than add to thealready excessive supply.

"But builders need to build enough to justify theirexistence," Burns said.

TIE IT UP

Some industry consultants and land brokers say the pace ofland purchases has slowed, but not significantly.

Land deals are still drawing multiple offers, although thenumber has dropped, said Greg Vogel, Chief Executive Officer ofbrokerage Land Advisors, which operates in Arizona, California,Nevada, Florida, Texas and other states.

Tom Dallape of the Hoffman Company, a brokerage inCalifornia and Nevada, said he has done as many deals this yearas last year. Land prices have fallen, but not by much, headded.

"A lot of these guys have been working on these deals forthe last 120 days and still have corporate mandates to go outthere and find land and tie it up," said broker Ryan Arp ofWestland Properties Group in the Phoenix area.

No. 1 builder D.R. Horton Inc has lots undercontract there, as does Beazer Homes USA Inc. HovnanianEnterprises Inc has been active there as well, Arpsaid.

Horton did not respond to a request for comment.

"We probably tied up more land this quarter than in thesecond quarter in terms of total lots," said Hovnanian ChiefFinancial Officer Larry Sorsby.

In the last month, some builders have started to try tospread the risk by teaming up on big land deals, said RichardGollis of The Concord Group, a real-estate consulting firm.

HUNKERING DOWN

But Ticonderoga Securities analyst Stephen East said thereis far more talk about cooperative buying than actual deals.

The big builders "are bidding against each other. We aredisappointed with the builders' lack of discipline," he said.

If the builders have stopped buying land at all, it is insmaller markets and on the periphery of larger ones.

Hovnanian, for example, will no longer buy land if it is anonerous commute from the nearest job center, Sorsby said.

KB Home is leaving Charleston, South Carolina,spokesman Cara Kane said.

And on the grounds they are leaving Jacksonville, Florida,Beazer declined to be listed in the local business journal'sdirectory, according to an article in the Jacksonville BusinessJournal.

Beazer did not respond to repeated requests for comment.

"All of them are evaluating whether to leave the smallermarkets," said East, calling more withdrawals "inevitable."

A MISSED OPPORTUNITY

The combination of ongoing land purchases and a focus onthe same prime markets, such as Phoenix, Las Vegas, themid-Atlantic region and parts of California, is causingbuilders to bid up lot prices now, as East said.

"There are very few markets that generate the volume thatyou need to justify a division," Gollis said. "Public buildershave been competing against each other for land positions."

Builders divide their business up into geographicaldivisions if the volume of business merits an office, staff anda division head.

Because key positions will be so crowded with publicbuilders, it will force them to compete on price, which willpinch margins and hurt profits.

"The number of buyer profiles you can sell to is prettylimited," said Jim Belfiore, the president of a real estateconsulting firm in Phoenix. "They're competing for entry-leveland lower first move-up buyers. They're really they'recompeting head-on."

What is more, East said, the builders "are missing a goldenopportunity to enter attractive markets when privatecompetitors are flat on their backs" because banks still willnot loan to them.

Most builders do not want to take the risk of starting anew division, East said, and some have told him they do nothave the skills required to do so.

Ultimately, more big builders in fewer markets will producewinners and losers. In addition to departures from smallermarkets, Burns expects some of the big players will have toleave the big markets, too.

"Do we need twelve public homebuilders in Riverside-SanBernardino?" Burns asked of a prime market in California."Right now it can't justify that many companies. But nobody'swilling to leave so, yes, they're just going to beat each otherup in Riverside-San Bernardino for a while." (Reporting by Helen Chernikoff; editing by Andre Grenon)