Obtaining lots for new homes remains a challenge for many of NAHB’s builders, but the shortages are not as widespread as they were in 2021, according to responses to the May 2023 survey for the NAHB/Wells Fargo Housing Market Index (HMI).
Nearly half (42%) of single-family home builders characterized the supply of lots simply as low, and another 25% said the supply was very low. That total (67%) is down from 76% who reported shortages in the September 2021 survey, but is still the second highest incidence of lot shortages on record since NAHB began collecting the information in 1997.
The current percentage of builders reporting a shortage of lots is particularly high relative to the current level of production. Over the past six months, total housing starts have been hovering around an annual rate of 1.4 million. In comparison, in 2005 when total housing starts peaked at more than 2 million, 53% of builders were reporting lot shortages.
One factor contributing to the lot shortage is availability of credit for developers. Loans to develop new residential lots were becoming both harder to obtain and more expensive over the prior year. Government regulation — which can lengthen and complicate the lot development process and add to its cost — is another factor. An NAHB study found that government regulation is responsible for roughly 42% of the cost of a lot for the average new single-family home.
Paul Emrath, NAHB vice president for survey and housing policy research, provides a breakdown of shortages among A, B and C lots in this Eye on Housing post.