Lot Values Set New Records

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Lot values for single-family detached housing starts in 2021 increased across the nation, with the national value and six out of nine Census division values setting new records. U.S. median lot price now stands at $55,000, according to NAHB’s analysis of the Census Bureau’s Survey of Construction (SOC) data.

In New England and Pacific, lot values surged 67% and 39%, respectively, and reached new historic highs, even after adjustments for inflation. As a result, half of single family detached homes started in New England were built on lots valued at or more than $200,000. Though these new lot values seem sky high, these are consistent with record lot shortages, recent significant building material price hikes and unprecedented supply challenges that have been constraining the pandemic-fueled housing boom in 2021.

When adjusted for inflation, lot values are now close to the record levels of the housing boom of 2005-2006 when half of lots were valued over $43,000, which is equivalent to about $57,800 when converted into inflation-adjusted 2021 dollars. At the same time, home building shifted towards smaller lots, resulting in record high prices per acre.

New England has been a division with the most expensive lots for decades but ended up in a league of its own in 2021 when, as noted above, its median lot price surged 67% and reached $200,000, almost quadrupling the national median. This means that half of all single-family detached (SFD) spec homes started in New England in 2021 were built on lots valued at or in excess of $200,000. New England is known for strict local zoning regulations that often require very low densities. As a matter of fact, the median lot size for single-family detached spec homes started in New England in 2021 was four times the national median. Therefore, it is not surprising that typical SFD spec homes in New England are built on some of the most expensive lots in the nation. The Pacific division has the smallest lots. However, median lot value reached $143,000 in 2021, the second most expensive value in the nation and a new record for the division, even after adjusting for inflation. As a result, Pacific division lots stand out for being most expensive in the nation in terms of per acre costs.

Similarly, the Middle Atlantic division recorded a strong rise in lot values and set a new record with half of lots priced at or above $90,000. This made the Middle Atlantic division SFD lots third most expensive in the US. The Mountain division followed with a median lot price of $75,000, a new divisional record.

Two neighboring divisions in the South – South Atlantic and East South Central – also posted divisional records. Nevertheless, these divisions remain home to some of the least expensive lots valued well below than the national median. Half of SFD spec homes started in these divisions in 2021 have lot values of $42,000 or less. The East South Central Division records 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.

The West South Central, which includes Texas, and East North Central divisions were the only two divisions that posted moderate declines in the median lot values. In case of the West South Central Division, it was a welcome change after recording some of the fastest lot value appreciation in recent years. Less than a decade ago, half of SFD lots here were going for $30,000 or less, almost half of the current median of $55,000.

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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8 replies

  1. As a developer in the North Carolina area, this average lot cost sounds very low and most likely counldn’t include developement cost. Our absolute cost to develop, not including land is $35,000 to $65,000 per lot depending on many variables.

  2. Most custom home Lots we build on in Utah are $300-500k, and there are quite a few areas much more than that. So $55,000 seems way low, and you can’t even develop a lot for that much as Rick mentioned.

    • As mentioned in the post, the analysis is limited to spec homes sales and does not include custom homes. Custom homes are typically built on larger lots (often owner’s land, not necessarily a typical lot) that would, undoubtedly, make them more expensive.

      Also, as mentioned above, the reported values are medians, meaning half of the lots in the division sell for more than the reported medians.

      The Census does not report values for individual states or metro areas, only for the entire divisions. Some areas are likely to be clustered at the higher end of the distribution, while other areas will be clustered at the lower end.

      • Completely understand that. Just did seem really low even for spec or production builders lots. Utah doesn’t have cheap lots anymore, so understand we are higher than a lot of ares also. Thanks for the feedback!

        • I was thinking as you are. The less than one acre site for the 22-unit TH project I’m appraising was bought for $1,250,000, and the per lot development costs are reported to have been $60,000. That’s a going in cost of $56,820/lot for raw land, so without developer’s profit the per lot cost is already $116,820.

  3. Thanks for the info Natalia. I’m appraising half the lots of a developed townhouse project near Buckhead in Fulton County, GA. The borrower is paying $190,000/lot with the plan to deliver 3-story units with 1,500 SF of GLA retailing at under $600,000. The ‘Lot-to-Home-Price ratio is approximately 33%.

    Have NAHB authors tracked ‘Lot-to-Home-Price ratios’ recently? A couple years ago the typical non-urban L-H-P ratios were from 20% to 25%. Since the lots are well-located, a 33% ratio doesn’t seem to be out of line. I would like your opinion.
    Thanks, and have a great weekend.
    Philip

    • This is a great point! I do not have the hard numbers to prove it (yet) but some trends on the national level seem to support your story. We noticed that in recent years AVERAGE sales prices of single-family detached (SFD) and attached (SFA) homes have been converging. That seemed counterintuitive, given that SFD homes are considerably larger, on average, around 30%. The reasonable explanation is that townhomes are built on more expensive land/lots, and L-H-P are higher for townhouses.

      Last time NAHB surveyed its members on construction costs was in the fall of 2019. At that time the results showed that finished lot costs were about 19% of the sales price but the survey sample was not large enough to differentiate between SFD and SFA homes.

      • Thanks for the reply. I found two land acquisitions for townhome development that show a pretty high raw land cost:

        Riverline Townhomes: In May 2019, West Hollywood Development purchased the 3.7-acre, RG-2-zoned site for $2,500,000. The sale involved an assemblage of 18 lots containing quadraplex buildings. This was $675,676/acre for a 52-unit project. The raw land price was $48,077 per townhouse lot. The townhomes developed feature 2,175 SF, two-story, 3 BR units with a full finished basement. They are priced from $520,000 to $600,000.

        Milestone Parc Townhomes: In December 2019, Piedmont Residential purchased the 1.44-acre, OIC-zoned site at the corner of Webb Road and Deerfield Parkway in Milton, Fulton County, GA 30004, for $679,250. The sale involved 3170 Webb Road. This was $471,701/acre for a nine-unit project. The raw land price was $75,472 per townhouse lot. The townhomes being developed feature 1,728 SF to 1,827 SF, three-story, 3 BR/2.5 BA units with a one-car garage and craftsman-style exteriors. They are priced from $520,000 to $600,000.

        These two projects are inferior compared to the subject’s location, although the Milton land reflected a higher land cost than my subject ($56,818/lot).

        I also found four other sales in much inferior Atlanta location that reflected lower per lot raw land prices.

        Since it’s not likely that an appraiser can find small batch TH lots to build out, I’ve found that applying a Lot-to-Home Price ratio to the target market price of the finished TH unit, the contributory value of the lot can be estimated. And the value will include developer’s profit.

        Thanks again. Have a great weekend.
        PB

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