Although shortages are not quite as widespread as they were in 2021, obtaining lots remains a challenge for many builders, according to recent results from the NAHB/Wells Fargo Housing Market Index (HMI) survey.  In special questions on the May 2025 HMI survey, 38% of single-family builders characterized the supply of lots as low, and another 26% said it was very low, for a total of 64% reporting some type of shortage. This is down slightly from the 67% reported in both 2023 and 2024, and down significantly from the peak of 76% in 2021 (a year after the COVID-19 outbreak). Nevertheless, at 64% the shortage percentage is higher than it had been at any time between 1997 (when NAHB first began tracking the number) and 2016. The current lot shortage seems particularly severe relative to the level of new housing production. Before the historic 2009-2010 trough in housing starts, the share of builders reporting a low or very low supply of lots never exceeded 53%—even in 2005 when starts topped 2.0 million.  However, by 2015, when starts had partially recovered (from the trough of under 600,000 to 1.1 million), the share of builders reporting lot shortages unexpectedly climbed to over 60%, and it has remained there stubbornly ever since. Over the past three years, the annual starts rate has been consistently under 1.5 million (approximately the long-run average from 1970 through 2000), while the share of builders reporting a low availability of lots has never dipped below 64%. In addition to overall lot supply, the HMI survey asks builders to rate the supply of A, B and C lots individually. Not surprisingly, shortages tend to be most acute among lots in the most desirable, or “A,” locations. In the May 2025 survey, 67% of builders said that the supply of “A” lots was low or very low, compared to 62% for “B” lots and 52% for “C” lots. None of these percentages were drastically different than they had been in 2024. A shortage of lots is not the only headwind the home building industry is facing. Rising cost of materials, availability of credit for builders, finding enough skilled labor, and inefficient regulatory costs all remain significant issues. An inadequate supply of lots simply adds to the list of challenges making it difficult to build homes, especially at the lower end of the price scale, and adversely impacting housing affordability.  Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.