Lot values for single-family detached homes continued to rise in 2022, with many regions setting new nominal records, but the increase in lot values has not kept pace with inflation in most of the United States, according to the National Association of Home Builders’ (NAHB) analysis of the Census Bureau’s Survey of Construction (SOC) data.
The national median lot value for single-family detached homes that began construction in 2022 was $56,000. However, inflation averaged 8% during the same period, and lot values, while increasing, lagged behind the national inflation rate. In only two regions—East North Central and South Atlantic—did lot values increase in real terms, meaning after adjusting for inflation. In East North Central, lot values surged by 42%, hitting a new record both nominally and in real terms.
Regional Breakdown
In the East North Central division, lot values reached an all-time high, with the median price for a lot surging by 42% from the previous year. This increase in real terms marked a historic milestone for the division. The South Atlantic division also experienced significant growth, with a 19% increase in lot values, setting a new nominal record. However, even with the fastest growth, South Atlantic lot values remain well below the national median of $56,000.
On the other hand, the New England division continued to have the most expensive lots, with median lot prices more than three times the national median. Homes built in New England in 2022 were built on lots valued at $180,000 or more. Known for strict local zoning regulations, New England requires very low-density housing, which leads to larger and more expensive lots. As such, the typical lot size for single-family detached homes in this region was 2.5 times the national median.
The Pacific division, which generally has the smallest lots, saw median lot values reaching $150,000 in 2022—another record for the region. This made lots in the Pacific division the second most expensive in the nation, especially in terms of per-acre costs.
Shrinking Lot Sizes and Builders’ Challenges
Despite the rise in lot values, builders are also facing the challenge of shrinking lot sizes. In 2022, nearly 68% of new single-family detached homes were built on lots smaller than 1/5 of an acre. This shift toward smaller lots reflects the ongoing difficulty builders face in obtaining desirable land for new homes, which has been compounded by shortages in certain areas.
Although the supply of available lots has improved slightly since the severe shortages of 2021, lot shortages are still a significant issue. According to a May 2023 survey by NAHB/Wells Fargo Housing Market Index, lot shortages in 2023 ranked as the second highest on record, further driving up prices and exacerbating affordability concerns for homebuyers.
The Economic Impact
The increase in lot values has had significant regional implications, particularly for developers and potential homeowners. In areas like New England, where land is not only expensive but also often requires more regulatory hurdles for development, the cost of building new homes is significantly higher. Meanwhile, regions like the East South Central division saw the lowest median lot values, making them more affordable for builders and homebuyers. These regional disparities highlight the broader trends shaping the housing market.
Conclusion
While lot values continue to rise, they are still falling short of the inflation rate in most parts of the country. Builders face challenges in securing land, particularly larger and more affordable lots, which impacts the overall cost of home construction. The regional variations in lot values, along with the ongoing trend toward smaller lots, signal shifting dynamics in the housing market. As inflation continues to shape economic conditions, the trajectory of lot values will likely remain a key factor in determining the affordability and accessibility of new homes across the U.S.