The lot shortage eased up in 2019, a year which has ended on a generally good note for the home building industry. Still, questions remain as we head into the new decade. One in particular is on a lot of builders' minds: How do we address the housing shortage, especially with the lack of lots? Over half of builders still feel that the supply of lots in their area is low. This figure is down from September 2018, but it still remains higher than any time before 2013. It is even harder to find a quality lot suited for a project, and these pressures are pushing prices up and lot sizes down. We may have won some battles in 2019, but the fight is not over to rebuild the home building industry.
The shortage of lots that has been hindering the housing recovery eased somewhat in 2019, but remains elevated by historical standards, according to a recent survey conducted by the National Association of Home Builders (NAHB). The survey consisted of a set of special questions included on the instrument for the September 2019 NAHB/Wells Fargo Housing Market Index (HMI).
The survey asked a panel of single-family builders, stratified by number of homes started and region of the country, to categorize the supply of lots in their market areas as “very high,” “high,” “normal,” “low,” or “very low,” as well as giving them an option to say they didn’t know or were not sure. In response, 58 percent of builders said the supply of lots was low (40 percent) or very low (18 percent). This is down somewhat from the all-time peak of 65 percent in September of 2018, but higher than it had been at any time prior to 2013 (NAHB has been asking the same lot supply questions on its HMI survey periodically since 1997).
The lot supply problem is particularly severe in relation to housing starts, which still have only partially recovered from the last downturn. After averaging 1.5 million from 1960-2007 and hitting a peak of 2 million in 2005, starts have recovered only to about 1.2 million a year.
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