Lot Shortage Still a Problem for Builders


In a 2014 survey conducted by NAHB, 59 percent of builders reported that the overall supply of developed lots in their areas was low to very low, unchanged from August 2013, but up from 43 percent in September 2012.  Fifty-nine percent is the largest low supply percentage since NAHB began periodically asking the question in 1997 on its monthly survey for the NAHB/Wells Fargo Housing Market Index (HMI).

The continued low supply of developed lots is a hindrance to housing recovery that is still quite modest by most standards. Figure 1 compares the HMI responses on lot supply to housing starts.  Starts have recovered from a low of 550,000 in 2009 to just over 900,000 in 2013 (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-five percent of builders said that the supply of “A” lots was very low, compared to 20 percent for lots in “B” and 11 percent for lots in “C” locations.

A shortage of buildable lots, especially in the most desirable locations translates into higher prices, as 39 percent of home builders said the price of developed “A” lots was somewhat higher than it was a year ago, and 30 percent said the price was substantially higher. In comparison, 18 percent of builders said the price of “B” lots was substantially higher than a year ago, and 10 percent said the price of “C” lots was substantially higher (Figure 2).


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