Lot Values Hit Record Highs

Filed in Economics, Land Development by on November 12, 2019 7 Comments

Median single-family lot prices in 2018 outpaced inflation (4.4% vs 2.4%) and reached a new record high, with half of the lots selling at or above $49,500, according to NAHB’s analysis of the Census Bureau’s Survey of Construction (SOC) data.

The most dramatic rise in lot values was observed in the West South Central division where median lot values more than doubled since the housing boom years.

While this constitutes a new nominal national record, lot values adjusted for inflation have not reached the housing boom peak levels. During the building boom – when twice as many single-family homes were started – half of the lots were selling above $43,000, which is equivalent in purchasing power to more than $53,000 in 2018.

A Geographic Breakdown

The West South Central division – which includes Texas, Oklahoma, Arkansa and Louisiana – stands out as a division where new historical records were hit not only in nominal terms but also when adjusted for inflation. Compared to the peak years of the housing boom, lot values more than doubled in this division.

Historically, lot values in the West South Central division have been the lowest in the nation. They started rising in 2013 and by 2015 caught up with the national median. As of 2018, half of the lots in the West South Central division sold for more than $62,000, 25% above the national median lot value for single-family spec homes of $49,500. This represents a significant jump in the division lot values since the building boom when more than half of lots were priced under $30,000.

Single-family spec homes started in New England are built on some of the most expensive lots in the nation. Half of all sold single-family homes started in New England in 2018 reported lot values in excess of $140,000, a new nominal record for the division. New England is known for strict local zoning regulations that often require very low densities. Therefore, it is not surprising that typical single-family spec homes started in New England are built on some of the largest and most expensive lots in the nation.

The Pacific division has the smallest lots. However, the median lot value reached $87,000 in 2018, the second most expensive value in the nation and a new nominal record for the division. As a result, the Pacific division lots stand out for being most expensive in the nation in terms of per acre costs.

The East North Central is another division that hit a new record high, with half of the lots priced above $52,000, exceeding the national median lot value for single-family spec homes.

The East South Central Division that has the second largest lots in the nation simultaneously reports the lowest median value of $38,000 per lot, thus defining the most economical lots in the nation as well as lowest per acre costs.

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.

NAHB economist Natalia Siniavskaia provides more analysis in this Eye on Housing blog post.

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Comments (7)

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  1. Peter Berube says:

    Good morning, where we build north of Boston if you can purchase a lot for under$250,000.00 you have a bargain.

  2. Scott Mauldin says:

    We sold developed 1/2 lots ,north of Ft Worth in 2006 for 50 k and the same lots in same area are 116 k due to high land cost ,fees ,and engineering standards implemented by city red tape snd over reaching

  3. Greg White says:

    Good Morning. In the Greater Salt Lake Area, building lots are running $150,000.00 and up. with a diminishing pool of available lots

  4. So far Tucson (vail arizona area) has not even come close to 2005 values

  5. I’ve been in the development related business (planning, engineering, surveying, software for development, etc.) for 52 years working the past 20 of those years in 47 states, and tracking home prices for the same 20 years. Again, this is somewhat of an observation, but it seems raw land prices is a huge factor. It is mostly artificial driven by the willingness of developers to pay absurd prices. For example, here in the Twin City market, we have no mountains to limit land, no ocean as a barrier to growth and the available land that is on the market is typically burdened with wetlands, easements, slopes and other negative impacts. So why is it that raw corn fields in this area can go between $100K and $200K+ an acre for low density residential? I believe because developers willing to pay that amount that drive the land prices skyward. Had 30 years ago when that same land was $8K an acre and the large major national builders competed (to drive up the price) in bidding wars and simply said, ‘$8K is too much so we are offering less’ then today’s lot prices, and home prices would not be as much of a problem. Just before the recession at a BATC (Builders Association Twin Cities) meeting I brought up our absurd raw land pricing to the keynote which was a person from the Metropolitan Council, and that speaker stated to the attendees ‘the high land prices were a sign of the strength of our economy’ – a few weeks later there was no land development economy and raw land value plummeted. In fact a bank called me during the recession to see if I wanted to buy lots in the Sauk Rapids development I designed that sold for $80K before the crash. Assuming the lots were out of my budget, I said no. Those $80K lots sold for $8.5K! That’s how terrible the crash was. Now that we recovered, we are back to ridiculous raw land pricing. Yes, you can blame other factors, but as a casual observer tracking the problems we are facing with development, I believe the bidding wars for land is the main issue. And as most reading this know, density does not guarantee affordability. The designers of architecture today simply pres buttons in Revitt or similar CAD software, that’s not design, and the cookie-cutter development patterns are excessively wasteful. Some of the European universities teach a holistic education that covers civil engineering, land planning, surveying, and architecture – no university in the USA has such an education, instead young people go into extreme debt to be a CAD or GIS operator, not a talented designer that can recognize how to control costs while increasing value, livability, function, and innovation. Urban study courses are just that, no effort to teach the next (and current) generation innovative solutions for the suburbs – because it’s evil to convert a corn field to a subdivision. You want a more sensible future – we need to go back to good design, not social engineering. Look at the auto companies. The new C8 Corvette for $60K provides the performance, and look of $200K+ supercars but with better safety, warranty, efficiency. The new Ford Mustang SUV – 0-60 in 3 seconds with a 250 mile range for similar prices of a normal SUV. Of course these come down assembly lines – houses don’t. – yet. Innovation is whats needed, and cities need to change their regulations which are based from the 1930’s to expedite change, and a ‘forms based’ or ‘smart code’ regulatory alternative only restricts any new innovation and guarantees gentrification – not affordability.

    • Shawn Kalin says:

      I concur. From 2002 to 2007 in Las Vegas, we faced a bidding war, whereby major builders bid up raw desert from 200K to 750K an acre. And there’s endless desert around the metro.

      Where do you think the boomers and rich will move to in the next 10 years?

      (Cities everywhere appear to be on a tightrope).

      • I think boomer (I’m 67) will judge based on the lifestyle they desire as well as the weather. We are also thinking of the next move to warmer weather (vs. Minnesota- brrr) For us, being by the Ocean would be nice, so maybe Charleston, but because I design developments nationally, being 15 minutes from Minneapolis airport means I can get direct flights pretty much every large city. I planned the 44 square mile Ranch At White Hills south of Vegas… not our lifestyle or weather, but everyone is different. Another factor is that the weather seems to be changing. I’d love to live in Trasona at Viera, but lots of rain and humidity – might actually get worse. Austin or San Antonio is nice and we can take the equity of our Minneapolis home – get a wonderful place – cash, and still have $100’sK to put in the bank. So the straight answer is because everyone’s desires are different and with climate change in a decade, Minnesota might be the place with warmer winters!

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