Shrinking Lots: Spec Building New Norm

The share of smaller lots remained record high in 2024, with two out of three new single-family detached homes sold occupying lots under 9,000 square feet (1/5 of an acre or less). Moreover, a high share of 40% occupied lots under 7,000 square feet (or less than 1/6 of an acre). These shares match the record highs established a year earlier, according to the latest Survey of Construction (SOC). Analysis of a quarter-century of SOC data reveals stark changes in the lot size distribution and documents a dramatic shift towards more compact building over the last two decades.

In 1999, when the Census Bureau started tracking these series, less than half (46%) of new for-sale single-family detached homes occupied lots under 9,000 square feet. The share of these smaller lots fluctuated around 48%, never crossing the 50% mark, until 2011. A shift in speculatively built (or spec) home building towards smaller lots first became noticeable during the anemic housing recovery that followed the Great Recession. Over that period, the share of spec homes built on lots smaller than or equal to one-fifth of an acre rose rapidly, from 47% in 2010 to 61% right before the pandemic.

The trend towards more compact spec building continued during the post-pandemic housing boom, with the share of smaller lots gaining an additional 4 percentage points during the last five years. The persistent shift towards building spec homes on smaller lots is seemingly harder to explain against the backdrop of the pandemic-triggered suburban flight and presumed shifts in preferences towards more spacious living. Less indicative of changing consumer preferences or the residential business cycle, the steadily rising share of spec homes built on smaller lots undoubtedly reflects unprecedented lot shortages confronted by home builders and their attempts to make new homes more affordable.

A closer look at the lot size distribution since 2010 reveals that the most dramatic shifts took place at the lowest end, with lots smaller than 7,000 square feet (or under 1/6 of an acre) increasing their share by 13 percentage points. In 2010, 27% of all sold single-family detached homes occupied lots under 1/6 of an acre. The share was not much different from the 1999 recording of 28%. Fast forward to 2024, and the percentage increased to 40%. At the same time, the share of single-family detached spec homes occupying lots between 1/6 and 1/5 acres increased from 20% in 2010 to 25% in 2024.

At the other end of the lot size distribution, the share of spec homes built on larger lots exceeding half an acre shrank from 14% in 2010 to 9% in 2024. The share of homes occupying lots between a quarter and half an acre declined from 24% to 19% over that period. The market share of homes built on lots between 1/5 and 1/4 of an acre lost 8 percentage points, declining from 15% to 7%.

The median lot size of a new single-family detached home sold in 2024 is 8,506 square feet, or just under one-fifth of an acre. This is slightly larger but statistically not different from the lowest on record median of 8,177 square feet set a year before the COVID-19 pandemic.

While the nation’s production of spec homes shifts towards smaller lots, regional differences in lot sizes persist. Looking at single-family detached spec homes started in 2024, the median lot size in New England is three times larger than the national median.

New England is known for strict local zoning regulations that often require very low density. Therefore, it is not surprising that single-family detached spec homes started in New England are built on some of the largest lots in the nation, with half of the lots exceeding 0.6 acres. The East South Central division is a distant second on the list, with the median lot occupying 0.3 acres.

At the other end of the spectrum, the Pacific division, where densities are high and developed land is scarce, has the smallest lots, with half of the lots being under 0.13 acres. The bordering Mountain division also reports typical lots smaller (0.15 acres) than the national median.

In the South, the West South Central division stands out for starting half of single-family detached spec homes on lots under 0.15 acres. This is half the size of typical lots in the neighboring East South Central division.

The analysis above is limited to single-family detached speculatively built homes. Custom homes built on an owner’s land with either the owner or a builder acting as the general contractor do not involve the work of a professional land developer subdividing a property. Therefore, in the case of custom homes, lots refer to an owner’s land area rather than lots in a conventional sense. Nevertheless, the SOC reports lot sizes for custom homes and shows that they tend to have larger lots. The median lot size for custom single-family detached homes started in 2024 is one acre.

For regional analysis, the median lot size is chosen over the average since averages tend to be heavily influenced by extreme outliers. In addition, the Census Bureau often masks extreme lot sizes and values on the public use SOC dataset, making it difficult to calculate averages precisely, but medians (as the midpoint of a frequency distribution) remain unaffected by these procedures.