NAHB: Lot Values Are On The Rise

According to National Association of Home Builders (NAHB)’s research of Census Bureau Survey of Construction (SOC) data, lot values for single-family detached spec homes continued to grow, with national values hitting a new high in 2023.

Beginning in 2023, the median lot valuation in the United States for single-family detached homes for sale was $58,000.

Of these, half had lots valued more and the other half had lots valued lower than the median.

In 2023, U.S. inflation exceeded lot appreciation, averaging 4.1%, despite lot values continuing to climb.

Even after accounting for inflation, median lot values are still lower than they were during the peak of the 2005–2006 housing bubble.

Half of the parcels were valued at or more than $43,000 at that time, which, in 2023 dollars adjusted for inflation, is almost $65,000.

Remember that in recent years, there has been a significant shift in the development of new spec homes towards smaller lots.

The percentage of lots smaller than one fifth of an acre increased from 48% in 2005 to 65% in 2023 following the housing boom of 2005–2006.

Thus, despite the fact that median lot values today are not historically high, they do represent a considerably different mix of lots than they did during the housing bubble or even ten years ago.

The persistent difficulties builders encounter in acquiring lots are reflected in the fact that lot values continue to rise as their sizes decrease.

While lot shortages are not as common as they were in 2021, they are still at their greatest level since NAHB started gathering data on the topic in 1997, according to the May 2023 poll for the NAHB/Wells Fargo Housing Market Index (HMI).

The valuations and enjoyment of lots differ significantly throughout US areas.

For many years, the region with the priciest lots has been New England. It has been at the top of the game lately, with median lot prices that will more than triple the national medians in 2023.

According to the most recent SOC statistics, lots worth at least $200,000 were used to build 50% of all single-family detached (SFD) spec homes that were built in New England in 2023.

Local zoning laws in New England are notoriously stringent and may call for extremely low densities.

In fact, when single-family detached spec homes were first introduced in New England in 2023, the median lot size was over three times larger than the national median.

So it should come as no surprise that some of the biggest and priciest lots in the country are used to build the average SFD spec homes in New England.

The smallest lots are found in the Pacific division. Nonetheless, in 2023, its median lot value—which was the second-highest in the country—reached $147,000.

Because of this, Pacific division lots are notable for having the highest per-acre costs in the country.

Half of the lots for SFD spec home starts in the nearby Mountain division reached a new high, valued at or over $90,000. The Mountain Division lots became the third most costly in the United States as a result.

Some of the most affordable spec home lots in the country may be found in the East South Central and South Atlantic divisions.

With half of SFD spec homes started in 2023 having lot prices of $46,000 or less, the East South Central division had the lowest median lot value.

These lots typically have larger lots than the national median, making them some of the most affordable in the US in terms of costs per acre.

The only other division where the median lot value ($49,000) is less than the $58,000 national median is South Atlantic, which is adjacent.

In the past ten years, lots in the West South Central, which encompasses Texas, have shown significant appreciation.

Half of the SFD spec homes in 2012 were built on lots valued at $30,000 or less, which is less than half of the current median of $61,000.

In this analysis, median lot values were selected over averages due to the fact that averages are frequently impacted by extreme outliers.

Furthermore, the Census Bureau frequently conceals extreme lot values on the public use SOC dataset, which complicates the calculation of averages. However, medians are not impacted by these procedures.

This analysis is restricted to single-family speculatively constructed homes, as defined by the year of construction and the reported sales prices.

The SOC does not report the corresponding land values for custom residences constructed on an owner’s land with either the owner or a builder serving as the general contractor.

As a result, this analysis does not include custom homes.

[Read more about this topic on Eyeonhousing.org]