If finding skilled laborers isn’t your top concern, chances are, finding lots to build on is your number one challenge.
For nearly 20 years, the NAHB/Wells Fargo Housing Market Index has periodically tracked builder sentiment regarding lot availability. In all that time, the percentage of builders reporting shortages has never been as high as it is now: 64% reported a “low” or “very low” lot supply — a 2% increase from the previous record set in May 2015.
Even back in 2005 — when the rate of housing starts was roughly twice that of today’s rate — the share of builders reporting shortages was down around 53%.
Nowhere is the scarcity of land more apparent than in the western U.S., where 39% of builders said lot supply was “very low” (compared to 23% in the South and 18% in both the Midwest and Northeast). But when referring specifically to premium “Class A” lots, builders from coast to coast reported more similar opinions of widespread shortages.
“Here in Northeast Ohio, the supply of ‘A’ lots has really dwindled,” said Bill Sanderson, vice president of Knez Homes, a Cleveland-area custom home building company. “A few spots are available for redevelopment, but that process takes time, and there still isn’t a ton of [land].”
Sanderson, who also serves as president of the Ohio Home Builders Association, says many builders have little choice but to look farther and farther out into the suburbs, where the prices need to be highly competitive to entice enough buyers.
“In those secondary locations, increased entitlement time and more regulations, including environmental and other issues, mean that lots are not coming online as quickly as planned,” Sanderson explained.