A shortage of buildable lots, especially in the most desirable locations, has emerged as a key factor holding back a more robust housing recovery, according to the latest survey on the topic conducted by NAHB.
Responding to special questions on the survey for the NAHB/Wells Fargo Housing Market Index in August, 59 percent of builders reported that the supply of lots in their markets was low or very low—up from 43 percent in September of last year, and the largest low supply percentage since NAHB began periodically asking builders the question in 1997. Moreover, this lot shortage has emerged against the backdrop of a housing recovery that is still modest by historical standards. To this point, housing starts have recovered from a low of 550,000 in 2009 to an annual rate of just under 900,000 (after averaging 1.5 million a year from 1960-2000, without ever plunging below 1 million until 2008).
The 59 percent includes 39 percent who characterized the supply of lots simply as “low” and 20 percent who said the supply of lots was “very low.” The shortages tended to be especially acute in the most desirable, or “A,” locations. Thirty-four percent of builders said that the supply of A lots was very low, compared to 18 percent for lots in B and 12 percent for lots in C locations.
The shortages have also translated into higher prices, as 34 percent of home builders said the price of developed A lots was somewhat higher than it was a year ago, and 26 percent said the price was substantially higher. In comparison, 15 percent of builders said the price of B lots was substantially higher than a year ago, and 11 percent said the price of C lots was substantially higher.
Lot shortages are one of several barriers that have arisen, restraining builders from responding completely to increased demand. Other barriers include a shortage of labor in carpentry and other key building trades, limited availability of loans even for credit worthy home builders and home buyers; and, more recently, an uptick in interest rates.
The full report on the lot supply survey is available here.