Problems with Lot Availability Remain Widespread


In a recent NAHB survey, 65 percent of builders reported that the overall supply of developed lots in their areas was low to very low. This is up only one percent from June 2017, but significantly higher than the 42 percent posted in September 2012.

The survey consisted of special questions appended to the instrument for the NAHB/Wells Fargo Housing Market Index (HMI) in September 2018. Sixty-five percent is the largest low supply percentage recorded since NAHB began periodically asking the question in the HMI survey in 1997. The 65 percent includes 43 percent who characterized the supply of lots simply as low and 22 percent who said the supply of lots was very low.

The lot supply problem is particularly severe in relation to housing starts, which still have only partially recovered from the last downturn. After averaging 1.5 million from 1960-2007 and hitting a peak of 2.0 million in 2005, starts have recovered only to about 1.2 million a year. The continued low supply of developed lots is a hindrance to a fuller housing recovery, and helps explain some of the recent weakness in new home sales.

Lot shortages tended to be especially acute in the most desirable “A” locations. Thirty one percent of builders said that the supply of “A” lots was very low, compared to 17 percent for “B” lots and 16 percent for “C” lots.

A shortage of buildable lots, especially in the most desirable locations translates into higher prices. Eighty-two percent of home builders in September 2018 said the price of developed “A” lots was somewhat to substantially higher than a year ago. In comparison, 77 percent and 70 percent of builders reporting said the price of “B” lots and “C” lots was somewhat to substantially than a year ago. In all cases the percentages were up slightly from June 2017, and the highest on record since NAHB began collecting the information in 2013.

Rising lot prices are one of the factors, along with higher labor and subcontractor costs and increasing interest rates, contributing to growing concerns about housing affordability.

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1 reply

  1. can you better define the definition of A, B and C locations? Type of location (rural, city…) and value, etc?

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