Lot Prices in Midwest Hit Record High
Builders are paying more for new-home lots, and those expenses will be passed on to home buyers. Single-family lot prices remained at record levels last year, with half costing $45,000 or more, according to a National Association of Home Builders analysis of Census Bureau data. It’s the second consecutive year that lot prices have been at record highs; the previous record was in 2006, during the housing boom, when lots averaged $43,000.
Rising lot values are most common in the West South Central region, which includes Texas, Oklahoma, Arkansas, and Louisiana, and the West North Central region, which includes North and South Dakotas, Minnesota, Nebraska, Iowa, Kansas, and Missouri. In those regions, lot values hit new record highs in 2016. The West South Central region typically sees lot values below the national median, but they started surging in 2015. Half of the lots in this region are now selling for more than $47,000, which is a significant jump from the boom years, when they were priced under $30,000. In the West North Central region, half of lots are priced above $49,000.
However, the New England area continues to have the priciest lots in the nation. “Single-family spec homes started in New England are built on some of the most expensive lots in the nation,” the NAHB reports on its Eye on Housing blog. “Half of all sold single-family homes started in New England in 2016 report lot values in excess of $125,000, by far exceeding the national median lot value for single-family spec homes of $45,000.” New England is known for strict local zoning regulations that require low densities, the NAHB reports.
Overall, “given that the nation’s lots are getting smaller and home production is still significantly below the historically normal levels, it might seem surprising that lots are sold at record high prices,” the NAHB notes. “However, the rising lot values are consistent with persistent record lot shortages that the NAHB reported in July of this year. They are also consistent with significant and rising regulatory costs that ultimately increase development costs and boost lot values.”
Source: “Lot Values Stable at Record High,” National Association of Home Builders’ Eye on Housing blog (Oct. 10, 2017)