Raw Land in Short Supply, Builders Report

Raw land is getting much harder to come by--a huge issue for builders--according a survey released on May 26 by the National Association of Home Builders (NAHB). Sixty-four percent of builders surveyed in the May NAHB/Wells Fargo Housing Market Index reported that the supply of lots in their markets was "low" or "very low"--up from 62 percent last year, and the highest that number has been since NAHB began collecting this data in 1997. "The lack of availability of buildable lots has quickly become one of the biggest issues facing our members," said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill., in a news release. "While labor shortages and regulatory burdens remain struggles as well, lot shortages are preventing our builders from responding to growing demand for housing." The lack of lots is most apparent in the western United States, where 39 percent of builders said lot supply was "very low," compared to 23 percent in the South and 18 percent in both the Midwest and Northeast.

Does this mean that the prices of new homes will rise? After all, if the laws of supply and demand apply, a tighter supply of lots would lead to builders paying higher prices--and that increase cost would no doubt be passed along to homebuyers. For more information on this study, visit http://eyeonhousing.org/2016/05/shortage-of-lots-now-worse-than-ever/.