Shortage of Lots Slows Housing Recovery

A shortage of buildable lots, especially in the most desirable locations, has emerged as a key factor holding back a more robust housing recovery, according to the latest survey on the topic conducted by NAHB.

Responding to special questions on the survey for the NAHB/Wells Fargo Housing Market Index in August, 59 percent of builders reported that the supply of lots in their markets was low or very low—up from 43 percent in September of last year, and the largest low supply percentage since NAHB began periodically asking builders the question in 1997.  Moreover, this lot shortage has emerged against the backdrop of a housing recovery that is still modest by historical standards.  To this point, housing starts have recovered from a low of 550,000 in 2009 to an annual rate of just under 900,000 (after averaging 1.5 million a year from 1960-2000, without ever plunging below 1 million until 2008).

Lots and Starts

The 59 percent includes 39 percent who characterized the supply of lots simply as “low” and 20 percent who said the supply of lots was “very low.”  The shortages tended to be especially acute in the most desirable, or “A,” locations.  Thirty-four percent of builders said that the supply of A lots was very low, compared to 18 percent for lots in B and 12 percent for lots in C locations.

The shortages have also translated into higher prices, as 34 percent of home builders said the price of developed A lots was somewhat higher than it was a year ago, and 26 percent said the price was substantially higher.  In comparison, 15 percent of builders said the price of B lots was substantially higher than a year ago, and 11 percent said the price of C lots was substantially higher.

Lot Prices

Lot shortages are one of several barriers that have arisen, restraining builders from responding completely to increased demand.  Other barriers include a shortage of labor in carpentry and other key building trades, limited availability of loans even for credit worthy home builders and home buyers; and, more recently, an uptick in interest rates.

The full report on the lot supply survey is available here.

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9 Responses to Shortage of Lots Slows Housing Recovery

  1. […] constraints: Builders have reported that a lack of buildable lots and other constraints are holding them back. In bathtub terms, a shortage of lots, construction […]

  2. […] constraints: Builders have reported that a lack of buildable lots and other constraints are holding them back. In bathtub terms, a shortage of lots, construction […]

  3. […] sector jobs has equaled or exceeded 100,000 for six of the last seven months. Additionally, an NAHB survey found that 59% of builders reported that the supply of lots in their markets was low or very low, up […]

  4. […] constraints: Builders have reported that a lack of buildable lots and other constraints are holding them back. In bathtub terms, a shortage of lots, construction […]

  5. […] constraints: Builders have reported that a lack of buildable lots and other constraints are holding them back. In bathtub terms, a shortage of lots, construction […]

  6. […] to builders (along with rising interest rates and shortages of labor,  building materials and lots), impeding their ability to respond quickly to increased […]

  7. […] continue to be slowed by higher costs of building materials, building lots and construction labor while confronting downward price pressures from low appraisals. Consumers […]

  8. […] shortages of labor and lots have also begun to have a real effect on builders’ ability to build and sell homes. As shortages […]

  9. […] shortages of labor and lots have also begun to have a real effect on builders’ ability to build and sell homes. As shortages […]

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