Builders Are Reporting There Are Fewer Lots Than Ever Before

May 24, 2016

It’s hard to build more homes to help ease tight inventory if there is nowhere to build the homes. Lot shortages have been one of the many problems builders have been facing in their attempt to construct more homes over the past few years and, unfortunately, finding new lots to build on only seems to be getting more difficult.

According to the NAHB’s Eye on Housing blog, the lot shortage hit a new record in May. On a recent NAHB survey, 64 percent of builders reported that the supply of lots in their markets was low or very low, 2 percent higher from last year and the highest percentage the NAHB has recorded since it began collecting the information in 1997.

Even more troublesome is the fact that this lot shortage is occurring when builders are only constructing homes at a rate below 1.2 million a year. Back in 2005, housing starts were over 2 million but the share of builders reporting a shortage of lots was 11 percent lower at 53 percent.

Builders often rank lots on desirability with A being the most desirable, B being slightly less desirable, and C being the least desirable. In NAHB’s May 2016 survey, A lots were ranked as having the most acute shortage as 69 percent of builders said they were in short supply. B lots fared slightly better at 60 percent and C lots, the least desirable, were at 47 percent.

The West had the highest percentage of builders who reported lots as being ‘very low,’ 39 percent, compared to ‘low,’ 27 percent. The South saw 23 percent of builders answer ‘very low’ while the Midwest and the Northeast (which had the highest share of builders reporting low or very low lot supply at 68 percent) each saw 18 percent of builders report very low lot levels.

Additionally, the larger a home builder was, the more likely they were to report lot shortages.

For a complete analysis and to view multiple accompanying charts and graphs, click the link below.

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