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Sunday, September 08, 2013

NY Times on Shortage of Buildable Lots

by Calculated Risk on 9/08/2013 10:08:00 AM

This is a follow-up to the NAHB survey released a few days ago showing a shortage of buildable lots in many areas.

From Shaila Dewan at the NY Times: Prices Are Rising for New Homes, and the Land They Are Built On

The latest land rush is in full swing, as developers realize that they have failed to feed the zoning, permitting and mapping pipeline, which can take months or years to turn raw fields into buildable lots. ...

After builders across the country spent decades feeding acre after acre of raw land into the maw of demand for single-family homes, the housing crash left them with a land surplus so large that lots were selling for pennies on the dollar. At the peak of supply, in 2009, there were enough lots to last almost eight years, according to MetroStudy, a firm that tracks housing data. Now there is less than four year’s worth, and only about a quarter of that is in the more desirable A- or B-rated locations.

“We have gone from a situation where five years ago everyone was saying, ‘There’s too many lots,’ to today, builders are literally crying on our shoulder saying, ‘There’s not enough lots. We can’t find any,’” said Bradley F. Hunter, the chief economist at MetroStudy.
Several years ago we discussed how, during a housing bust, land prices usually fall faster than house prices (no one wanted land a few years ago).   As an example, back in 2008 I spoke with a buyer who purchased land in the SoCal Inland Empire for $0.15 on the dollar from a homebuilder.  And that was improved land.  Now land prices are rising quickly.

The land developers are scrambling to catch up since it takes time to obtain all the entitlements and this could be an issue for some home buiders next year too.