Lot Values Down in 2019


According to NAHB’s analysis of the Census Bureau’s Survey of Construction (SOC) data, median single-family lot prices came down in 2019, breaking their relentless climb for the first time since 2013. The 2019 median lot price was $45,000, which amounts to a 9% decline since 2018, when half of the lots were selling at or above $49,500. The West divisions – Mountain and Pacific – stood out as the two Census divisions where lot values continued to grow rapidly, with the Pacific setting a new record high with half of the lots priced above $95,000.

Lot values are now down to 2015-2016 levels. When adjusted for inflation, lot values are comparable to 2014 when half of lots were going for over $42,000, which is equivalent to current prices when converted in 2019 dollars.

Some of the most expensive lots are in New England. Half of all sold single-family homes started in New England in 2019 report lot values in excess of $110,000, though below the last year record of $140,000. 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 has the smallest lots. However, median lot value reached $95,000 in 2019, the second most expensive value in the nation and a new nominal record for the division. As a result, Pacific division lots stand out for being most expensive in the nation in terms of per acre costs.

In sharp contrast with the rest of the nation but aligning with the neighboring Pacific, the Mountain division recorded a strong rise in lot values, with median values jumping from $50,000 in 2018 to 65,000 in 2019. This made Mountain division lots third most expensive in the US.

At the other end of the lot value distribution are two divisions in the South – East South Central and South Atlantic – where half of the lots are sold for $35,000 or less. The East South Central Division simultaneously recorded the second largest lots in the nation, thus defining some of the most economical lots as well as lowest per acre costs in the US.

In addition to the tried-and-true supply-demand arguments, the dramatic differences in lot values across the nation can be partially explained by highly variant regulatory costs that ultimately increase development costs and boost lot values. Areas where home building shifts towards less dense areas with typically lower land values and more lax regulatory environment are likely to register declining lot values, all else equal. Whereas areas where home building shifts towards more urban and dense areas with characteristically higher land values and more stringent regulation requirements are expected to record rising lot values.

For this analysis, 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.

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