High Price of Land means Low Construction Starts

Builders have to pay more for land, which means building bigger, more expensive homes is a safer bet to break even
June 17, 2015
High Price of Land means Low Construction Starts
High Price of Land means Low Construction Starts

Why aren’t builders building more houses? According to CNBC’s Diana Olick, builders report that the reason is a low overall supply of developed lots.

More than 60 percent of builders surveyed by the NAHB said that land was the main reason they aren’t building more, the highest percentage since the question was included in the survey in 1997.

Paul Emrath, vice president of survey and housing policy research at NAHB, tells CNBC that no-growth movements, new environmental development standards, and neighborhood preservation platforms of local politicians push land prices higher.

Today, land prices have surpassed their peak values in many markets across the nation where builders are active, such as Texas.

"Land prices didn't fall nearly as much as all of us thought they would," noted John Burns in a recent interview with CNBC. "Land is extremely expensive, the developer is selling it for a lot of money and the only way to make money for a builder is to build a big, huge expensive home."

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