Vacant Lots Becoming Scarce

October 12, 2021
The median cost of a single-family home lot hit a record $53,000 last year.


The current inventory of vacant developed lots is at its lowest level since the Zonda market research firm began tracking it in 2015. They're "disappearing ... faster than replacement lots can be brought to market," says the company's chief economist, Ali Wolf. "Builders are snatching them up," she says -- in some cases, "aggressively" buying parcels "they wouldn't even have considered a year ago. ... All the top markets are significantly undersupplied." The number of building sites in development is up 14% over a year ago, Zonda recently reported. However, the lion's share are still in the excavation stage. So, they won't be ready for builders until sometime next year. The rest are waiting for the developer to put in streets (or the streets are currently being added). These sites are expected to be ready to accept construction later this year -- but only "if everything goes smoothly," Wolf says. Nevertheless, the economist believes "a lot more houses will hit the market in the next 24 months." And that, she says, should put a stop to the extraordinary run-up in new house prices. Or at least slow it down.  Many factors go into the price of new construction. But a principal one is what builders pay for building sites, and that cost is up significantly. Lot values for detached, single-family homes started last year surged 18%, Census figures show, driving up the cost to a record median of $53,000. And that doesn't include custom-built houses. Though the jump in prices is "unprecedented," Natalia Siniavskaia, an NAHB economist, says it is "consistent with other significant building material price hikes and undeniable supply challenges that have been constraining the pandemic-fueled housing boom." Higher lot costs are occurring even though lot sizes are shrinking. The median stood at 8,306 square feet, or just under a fifth of an acre, in 2020, the NAHB says. That's about 125 feet from the smallest lot size ever. And a record 39% of all lots are under 0.16 acres.

Source: Lew Sichelman, The Housing Scene