Lot Values Trend Higher

2024-07-10T07:57:49-05:00

Lot values for single-family detached spec homes continued to rise, with national values reaching a new high in 2023, according to NAHB’s analysis of the Census Bureau’s Survey of Construction (SOC) data. The U.S. median lot value for single family detached for-sale homes started in 2023 stood at $58,000, with half of the lots valued higher and half of the lots valued lower than the median. Even though lot values continued to rise, overall U.S. inflation averaged 4.1% in 2023 and outpaced lot appreciation. When adjusted for inflation, median lot values remain below the record levels of the housing boom of 2005-2006. At that time, half of the lots were valued at or over $43,000, which is equivalent to about $65,000 when converted into inflation-adjusted 2023 dollars. It is important to keep in mind that new spec home construction experienced dramatic shifts towards smaller lots in recent years. Since the housing boom of 2005-2006, the share of lots under 1/5 of an acre rose from 48% in 2005 to 65% in 2023. So even though current median lot values are not record high in real terms, they reflect a very different mix of lots compared to the housing boom years or even a decade ago.  The fact that lot values keep rising as their sizes shrink reflects ongoing challenges builders face in obtaining lots. Even though lot shortages are not quite as widespread as they were in 2021, their current incidence recorded by the May 2023 survey for the NAHB/Wells Fargo Housing Market Index (HMI) is the second highest on record since NAHB began collecting this information in 1997. There is a substantial variation in lot values and appreciation across the US regions. New England has been a division with the most expensive lots for decades. Most recently, it has been in a league of its own with its median lot prices more than tripling the national medians in 2023. As of the latest SOC data, half of all single-family detached (SFD) spec homes started in New England in 2023 were built on lots valued at or over $200,000. New England is known for strict local zoning regulations that often require very low densities. As a matter of fact, the median lot size for single-family detached spec homes started in New England in 2023 was almost 3 times the national median. Therefore, it is not surprising that typical SFD spec homes in New England are built on some of the largest and most expensive lots in the nation. The Pacific division has the smallest lots. However, its median lot value reached $147,000 in 2023, the second highest median in the nation. As a result, Pacific division lots stand out for being the most expensive in the nation in terms of per acre costs. The neighboring Mountain division hit a new record high, with half of the lots for SFD spec home starts valued at or more than $90,000. This made the Mountain division lots the third most expensive in the US. The East South Central and South Atlantic divisions are home to some of the least expensive spec home lots in the nation. The East South Central division recorded the lowest median lot value, with half of SFD spec homes started in 2023 registering lot values of $46,000 or less. Typical lots here are also significantly larger than the national median, thus defining some of the most economical lots, as well as lowest per acre costs in the US. The neighboring South Atlantic is the only other division where the median lot value ($49,000) is below the national median of $58,000. Lots in the West South Central, which includes Texas, appreciated dramatically during the last decade.  In 2012, half of the SFD spec homes were started on lots valued at or below $30,000, half of the current median of $61,000.  For this analysis, median lot values were chosen over averages, since averages tend to be heavily influenced by extreme outliers. In addition, the Census Bureau often masks extreme lot values on the public use SOC dataset making it difficult to calculate averages precisely, but medians remain unaffected by these procedures. This analysis is limited to single-family speculatively built homes by year started and with reported sales prices. For custom homes built on an owner’s land with either the owner or a builder acting as the general contractor, the corresponding land values are not reported in the SOC. Consequently, custom homes are excluded from this analysis. Discover more from Eye On Housing Subscribe to get the latest posts to your email.