When housing starts in a particular market exceed the number of new home lots being developed at the same time, an imbalance occurs.
Often, the imbalance--which results in ever-scarcer vacant, developed lots--means that home builders in that market or submarket need to slow down their sales, and their operations, because they don't have the home site supply to feed their production machines.
While the early part of the recovery has been operating generally in that sphere for the past 36 months or so, Metrostudy chief economist is starting to see a shift. As a matter of fact, it's a dramatic inflection point in some markets like Austin, Tx. In a noteworthy number of markets, Hunter's seeing the curves--housing starts vs. new home sites developed for sale--invert.
Generally, this is an optimistic sign on the part of home builders, who have started to invest in developing more dirt to amp up their production in those markets. Hunter writes:
We will be watching these markets with great interest over the next few months to see if this trend accelerates, or if it more markets join the ranks of those with recent slowdowns. Homebuilder executives are telling me that they are finally starting to say “no” to land deals, now that land and lot prices are back to, or above, the price levels of the previous peak in many markets. This new discipline in land buying could feed into a lower pace of lot development, but then again, increased price resistance by builders may force land sellers to get more reasonable with prices and terms, and that would allow lot development and starts to rise further (and at a nice clip) for the next several years.
Let us know what you're seeing and hearing.