Builders Concerns of Lot Availability Unchanged from 2016


The monthly NAHB/Wells Fargo Housing Market Index (HMI) survey includes a set of “special” questions on a topic of current interest to the housing industry. In June 2017, the special questions asked builders about the supply and price of developed lots.

Sixty-four percent of builders reported that the overall supply of developed lots in their areas was low to very low, the same share in May 2016, but up from 43 percent in September 2012. This is the largest share of builders reporting low to very low lot supply since NAHB began periodically asking the question in 1997 on its monthly HMI survey.

The continued low supply of developed lots is a hindrance to a faster housing recovery. The chart below compares the HMI responses on lot supply to housing starts. Starts have recovered from a low of 554,000 in 2009 to over 1 million in 2016 (after averaging 1.5 million a year from 1960-2000, without ever plunging below 1 million until 2008).

The 64 percent includes 39 percent who characterized the supply of lots simply as “low” and 25 percent who said the supply of lots was “very low.” The shortages tended to be especially acute in the most desirable “A” locations. Forty percent of builders said that the supply of “A” lots was very low, compared to 22 percent for “B” lots and 17 percent for “C” lots.

A shortage of buildable lots, especially in the most desirable locations translates into higher prices, as 81 percent of home builders in June 2017 said the price of developed “A” lots was somewhat to substantially higher than it was a year ago. In comparison, 74 percent of builders said the price of “B” lots was somewhat to substantially higher than a year ago. The price of “C” lots was also somewhat to substantially higher in June 2017 than it was a year ago, according to 65 percent of the builders.


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1 reply

  1. Yes. Makes sense, especially with growing demand vs increasing resistance to developing property. Took a minute to understand the graphic though as the “positive” starts charting vs the “negative” lot supply number… think about inverting the lot supply bars…. instead of showing the 65% as a positive, show it as 35% (100-65) and the trend of bars will show differently.

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