A major culprit behind the rising costs of new-home construction: pricey lots. In fact, the median single-family lot price outpaced inflation to reach a record high in 2018, according to a newly released analysis from the National Association of Home Builders. Half of lots sold for at or above $49,500.
“Given that the nation’s lots are getting smaller and home production is still significantly below the historically normal levels, it might seem surprising that lot values keep going up,” NAHB reports on its blog, Eye on Housing. “However, the rising lot values are consistent with persistent record lot shortages that NAHB reported recently. They are also consistent with significant and rising regulatory costs that ultimately increase developments costs and boost lot values.”
Single-family spec homes started in New England are on the priciest lots in the nation. Half of all sold single-family homes started in the region last year were more than $140,000—a record high for the area. “New England is known for strict local zoning regulations that often require very low densities,” NAHB reports. “Therefore, it is not surprising that the typical single-family spec homes started in New England are built on some of the largest and most expensive lots in the nation.”
The Pacific division—consisting of California, Oregon, and Washington—have the smallest lots in the nation, but median lot values reached $87,000 last year, the second priciest in the nation.
The West South Central region—consisting of the states of Texas, Oklahoma, Louisiana, and Arkansas—saw lot values rise the most in 2018. The median lot values in the region have more than doubled since the housing boom (when lots were priced under $30,000), NAHB reports. Lot values are usually the lowest in the nation in this region, but starting in 2015, prices caught up with the national median. Half of the lots in the region sell for more than $62,000—25% above the national median lot value for single-family spec homes.
Overall, however, NAHB does note that while the lot price surge is a new nominal national record, lot values when adjusted for inflation have not reached the same levels yet as the housing boom years.