Dive Brief:
- The availability of lots has reached new lows, with 64% of builders reporting that lot supply in their regions was low or very low — the highest percentage since tracking began in 1997, according to a National Association of Home Builders/Wells Fargo Housing Market Index survey.
- The shortage is greater, 69% of builders said, for premium, or "A," lots, and the West leads in the number of builders — 39% — who reported that they experienced a very low supply of available lots.
- According to the NAHB, one of the main takeaways from the survey is that the current, record lot shortage comes at a time of fewer than 1.2 million home starts a year, which is a "notable" figure considering that only 53% of builders reported lot shortages when home starts were more than 2 million annually.
Dive Insight:
The NAHB said the survey also revealed that the lack of suitable land affected larger homebuilders more than their smaller counterparts, with 70% of those with more than 100 starts reporting low supply, followed by builders with six to 99 starts (65%) and those with fewer than six starts (62%). The association noted that this trend has likely occurred because smaller builders are more likely to be custom builders for homeowners who already own lots.
A February NAHB/Wells Fargo Housing Market Index survey revealed that 59% of surveyed builders believed the cost and availability of developed lots was the second biggest problem builders faced, and the NAHB said this "pessimism" about land — as well as the top concern of labor — were indications as to what might limit a full housing recovery.
Analysts in an April Goldman Sachs report also pointed the finger at available land, along with high regulatory costs, as the reason for the lack of expected gains in residential construction, as opposed to a shortage of skilled workers. In a March interview with CBS News, KB Homes President and CEO Jeffrey Mezger said the homebuilding company is seeing hints of a shortage in the skilled labor market, but locating an adequate supply of suitable land is its biggest issue.
NAHB Chief Economist Robert Dietz also referenced the lot shortage in a webinar last month when he said, "In some ways, I think (lots) will come to challenge labor as the top business challenge."
