If you’re looking for the culprit behind the rising costs of new home construction, look no further than lot prices, which rose so fast that they outpaced inflation in 2018. That’s according to a new report from the National Association of Home Builders, which said the average lot price that year reached $49,500, a record high.
“Given that the nation’s lots are getting smaller and home production is still significantly below the historically normal levels, it might seem surprising that lot values keep going up,” NAHB said in its Eye on Housing blog. “However, the rising lot values are consistent with persistent record lot shortages that NAHB reported recently. They are also consistent with significant and rising regulatory costs that ultimately increase developments costs and boost lot values.”
The priciest lots in the U.S. can be found in New Eng;and, where half of all single-family homes sold in 2018 were built on lots costing $140,000, which of course was another record high.
“New England is known for strict local zoning regulations that often require very low densities,” the NAHB said. “Therefore, it is not surprising that the typical single-family spec homes started in New England are built on some of the largest and most expensive lots in the nation.”
Expensive lots can be found in California, Oregon and Washington too, with median prices there reaching $87,000, the second-most expensive in the U.S.
Meanwhile the West South Central region – which consists of Arkansas, Louisiana, Oklahoma and Texas – saw the highest gains in lot values in 2018. The median value of lots there has more than doubled since the start of the housing boom to $62,000, some 25% above the national median lot value for single-family homes. And that’s from a region which has traditionally always had the cheapest building lots in the country.
Overall, however, NAHB does note that while the lot price surge is a new nominal national record, lot values when adjusted for inflation have not reached the same levels yet as the housing boom years.