Land is the main reason behind the shortage in supply of new homes, even though comparing to last year’s figures this year was more fruitful in the construction industry.
16 Jun 2015 – CNBC
More than 60 percent of builders surveyed in May reported that the overall supply of developed lots—that is, with all the necessary infrastructure to build homes—was low to very low, according to the National Association of Home Builders (NAHB). That is the highest percentage since the builders began asking the question back in 1997.
“You have to find the land, you’ve got to be able to buy it and you’ve got to persuade someone to let you develop it. The one you hear the most about is the last one,” said Paul Emrath, vice president of survey and housing policy research at NAHB.
Emrath points to stronger no-growth movements, new environmental development standards and the plain fact that so many local politicians run on platforms that include preserving neighborhoods. The problem is more acute for so-called Class A lots, which are in the most desirable locations, usually in or near to city centers.
Where we really see the difference in A lots is the price going up. Demand is there but at what price?” added Emrath.
Land prices have actually surpassed their peak values in many markets where builders are particularly active, especially in Texas. Finished lot values in Dallas are 40 percent higher than their peak, according to John Burns Real Estate Consulting. Other markets, like Charlotte and Raleigh in North Carolina, Denver and Phoenix are also seeing new highs.
“Land prices didn’t fall nearly as much as all of us thought they would,” noted John Burns in a recent interview. “Land is extremely expensive, the developer is selling it for a lot of money and the only way to make money for a builder is to build a big, huge expensive home.”
That is why the median sale price of a newly built home continues to soar, up more than 8 percent in April from a year ago, according to the U.S. Census. Builders are focusing on more expensive homes, because that’s where they can make the most profit. Entry-level buyers are few and far between in today’s housing market overall and particularly so in new construction.
