Residential Land Demand Wavers As Builders Face Falling Profits

After several years of intense competition, the residential land market is beginning to cool. According to a recent study from John Burns Research and Consulting (JBREC), lot demand has fallen. Currently, only 28% of land brokers now report strong demand, compared with 76% one year ago. Nearly 80% also cite more cancellations and renegotiations as deals that once worked no longer pencil out.

Why has the demand for residential land weakened?

While national new home prices are down by 1% as of Q-2 2025, lot prices continue to rise. In high demand areas, lot prices were up by 6% and by about 4% in outer markets during this time.

Because home prices have been unable to rise along land prices, builders are seeing less profit. JBREC suggests this will cause more home builders to pull out of deals in the long run, ultimately lowering demand.

Less demand could give builders more power in the long term

Rising costs could give builders some negotiating power in the long term. According to JBREC, some deals now include delayed takedowns, or purchasing lots over time. However, bulk acquisitions at profitable prices remain difficult to find. Land banking also continues to grow in popularity as a less risky option for builders.

Amid weak profit margins, builder sentiment has remained low throughout 2025

• Builder Confidence Dips Amid Ongoing Cost Concerns: Due to tariffs and other economic constraints, builder sentiment dropped to its lowest level in five months during February 2025.
• Optimism Among Home Builders Remains Low: Optimism for builders was low in May, with many reporting having to cut home prices by an average of 5%.