Lot values for single-family detached spec homes rose during 2022, but they lagged behind the 8% pace of inflation during the calendar year in seven of nine Census divisions. Lot values increased even in real terms in the East North Central and South Atlantic census regions, where lot prices rose 42% and 19%, respectively, according to an NAHB analysis of Survey of Construction data.
On the national level when adjusted for inflation, median lot values remain below the record levels of the housing boom of 2005-2006 when half of lots were valued at or over $43,000, which is equivalent to about $62,400 when converted into inflation-adjusted 2022 dollars. It is prudent to remember that new spec home construction experienced dramatic shifts toward smaller lots over that time period, with the share of lots under 1/5 of an acre rising from 48% in 2005 to almost 68% in 2022. So even though current median lot values are not record high in real terms, they reflect a very different mix of lots compared to the housing boom years or even a decade ago.
The fact that lot values keep rising as their size shrink reflects ongoing challenges builders face in obtaining lots. Even though lot shortages are not quite as widespread as they were in 2021, their current incidence recorded by the May 2023 survey for the NAHB/Wells Fargo Housing Market Index (HMI) is second highest on record since NAHB began collecting this information in 1997.
There is a substantial variation in lot values and appreciation across the US regions. New England has been a division with the most expensive lots for decades. Most recently, it has been in a league of its own with its median lot prices more than tripling national medians in 2022. As of the latest SOC data, half of all single-family detached spec homes started in New England in 2022 were built on lots valued at or in excess of $180,000. New England is known for strict local zoning regulations that often require very low densities. As a matter of fact, the median lot size for single-family detached spec homes started in New England in 2022 was 2.5 times the national median. Therefore, it is not surprising that typical SFD spec homes in New England are built on some of the largest and most expensive lots in the nation.Read More