Eye On Housing
Single-family lot prices set a new record in 2015, with half of the lots priced at or above $45,000. According to NAHB’s analysis of the Census Bureau’s Survey of Construction (SOC) data, this is the highest median lot value on record and exceeds the previous record of $43,000 reached in 2006, in the midst of the housing boom when twice as many single-family homes were started.
Given that nation’s lots are getting smaller and home production is still significantly below the historically normal levels, it might seem surprising that lots are becoming more expensive. However, the rising lot values are consistent with record lot shortages that NAHB reported in May of this year. They are also consistent with significant and rising regulatory costs that ultimately increase development costs and boost lot values. It is also possible that home building shifted towards more urban and dense areas where land values are typically higher, and land development faces more stringent regulation requirements.
The rising lot values are most pronounced in the West South Central and Middle Atlantic divisions where lot values established historical records in 2015. In the West South Central division (that includes Texas, Oklahoma, Arkansas, and Louisiana), lot values had traditionally been below the national median but reached the $45,000 mark and caught up with the national median in 2015. This represents a significant jump in the division lot values since the housing boom years when more than half of lots were priced under $30,000.
The Middle Atlantic division also established record high lot values, with half of the lots priced above $80,000, significantly exceeding the lot values of the boom era. In 2015, Middle Atlantic lots became most expensive in the nation in terms of per acre costs, overtaking the spot traditionally held by lots in the Pacific division.
Single-family spec homes started in New England are built on some of the most expensive lots in the nation. Half of all sold single-family homes started in New England in 2015 report lot values in excess of $120,000, by far exceeding the national median lot value for single-family spec homes of $45,000. New England is known for strict local zoning regulations that often require very low densities. Therefore, it is not surprising that typical single-family spec homes started in New England are built on some of the largest and most expensive lots in the nation.
The Pacific division where densities are high and developed land is scarce has the smallest lots. However, high regulatory costs push the median lot value to $58,200, the third most expensive value and second most expensive per acre costs in the nation. Nevertheless, the current division median lot value is still below the housing boom levels, when half of the lots were priced at above $80,000.
The East South Central Division that has the second largest lots in the nation simultaneously reports the lowest median value of $35,000 per lot, thus defining the most economical per acre lots in the nation.
For this analysis, the median lot values were chosen over averages since averages tend to be heavily influenced by extreme outliers. In addition, the Census Bureau often masks extreme lot values on the public use SOC dataset making it difficult to calculate averages precisely but medians remain unaffected by these procedures.
This analysis is limited to single-family speculatively-built homes by year started and with reported sales prices. For custom homes built on owner’s land with either the owner or a builder acting as the general contractor, the corresponding land values are not reported in the SOC. Consequently, custom homes are excluded from the analysis.
work in the appraisal industry as a reviewer, found this to be very interesting.