Land prices reached a record high in 2018, the National Association of Home Builders said on Monday.
The median price of a single-family building lot rose to $49,500 in 2018, a 4.4% gain from a year earlier, said the NAHB. That’s about double the rate of inflation for the same period.
“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. “However, the rising lot values are consistent with persistent record lot shortages that NAHB reported recently.”
Part of the reason for the higher cost is an increase in “significant and rising regulatory costs that ultimately increase development costs and boost lot values,” NAHB said. “It is also possible that home building shifted towards more urban and dense areas where land values are typically higher, and land development faces more stringent regulation requirements.”
Sales of new homes probably will rise to a 13-year high of 750,000 in 2020, according to Lawrence Yun, chief economist of the National Association of Realtors. That 11% gain would push sales to the highest reading since 2007.
The median price of new houses probably will be $314,200 in 2020, rising from $313,500 this year, Yun said.
“We’ll see an increase in inventory, but not any oversupply, so home prices should continue to move higher – our hope is in a much tamer fashion,” Yun said at last week’s NAR convention in San Francisco.
The median price for a building lot in NAHB’s report varied from $38,000 in Louisiana and Mississippi to $140,000 in the New England region that includes Massachusetts and Connecticut.
In the Midwest region of the U.S., it was $59,000, and in the states along the U.S. West Coast, it was $87,000.
The NAHB report is based on the Census Bureau’s Survey of Construction data. It includes the reported sale prices of single-family speculatively-built homes by the year started.
For custom homes built on the owner’s land with either the owner or a builder acting as the general contractor, data for the land values are not reported in the Census Bureau’s report.