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Shortage of Lots Worries Home Builders

comments (0) June 6th, 2014 in Blogs
ScottG Scott Gibson, contributing writer

Click To Enlarge Photo: hattiesburgmemory on

A majority of builders polled this spring by the National Association of Home Builders said they were finding a "low" or "very low" supply of developed lots where construction could begin right away, according to a report at MarketWatch.comThe result will be higher prices for homebuyers.

"Builders price homes based on what they are going to have to pay for all the ingredients," David Crowe, NAHB's chief economist, told MarketWatch. "If they are starting to pay more for lots, they are going to have to pass that on right away."

The best building lots, so called "A lots," are in prime locations, such as in transportation corridors--and they're getting more expensive. Of those responding to the survey, 69% said these lots were "substantially" or "somewhat" more expensive than a year ago. Most builders also said that "B lots," which are somewhat less desirable, cost more as well.

Builders who found A, B, or C lots less expensive numbered 10% or less.

Crowe told Marketwatch one reason for the shortage is that three or four years ago, developers weren't expecting demand to rise so quickly, so they didn't start the necessary work to get lots ready. Developers also were hampered by a tough borrowing environment.

A total of 387 builders responded to the survey, most of whom build fewer than 25 homes per year.

The situation may be better for large builders, according to the Marketwatch report. Toll Brothers said it had 50,000 home sites by the end of April, an increase of 11-1/2% from a year ago. D.R. Horton, another big builder, said its holdings were the best in its 35-year history.

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