Residential real estate values are climbing across the board, influencing not only the price of homes but also the land they occupy.
According to the National Association of Home Builders’ (NAHB) recent analysis of the Census Bureau’s Survey of Construction (SOC) data, lot values for single-family homes that began construction in 2020 rose 18 percent — an “unprecedented” increase attributable to soaring material costs and a supply and demand imbalance.
Nationwide, the median lot price surged to $53,000, setting a new record. When adjusted for inflation, 2020 lot values neared those reported during the 2005-2006 housing boom when the majority of lots sold for over $43,000, or about $55,000 in today’s dollars.
At $120,000, New England was the region with the most expensive median lot price last year — a title it has held for decades. More than half of all single-family homes started in 2020 were priced over the median. Zoning laws that favor low-density housing and the region’s small geographic size have upped land values throughout the northeast.
The second most expensive region was the Pacific at a median lot value of $103,000. The West Coast is home to the smallest lot sizes, with the typical new construction single-family home situated on a 0.14-acre parcel. If price per acre were taken into consideration, the Pacific would win out over New England in the rankings.
Median lot values in the Mountain region exceeded expectations in 2020, “[setting] a new record with half of the lots priced at or above $73,000,” noted NAHB. This made it the third most expensive region for lot values in the United States. West South Central — an area that includes Texas — recorded the fastest lot price appreciation, climbing 20 percent annually to $60,000. Eight years ago, the median-priced lot for a new single-family home cost about half that.
The lowest-priced land was found in East South Central and South Atlantic, where most spec homes that were started in 2020 had median lot values of $40,000 and $35,000, respectively. The East South Central region offered the best bang for buyers’ buck as it had the second-largest lots in the nation at a median size of 0.3 acres.
For some, building a home from the ground-up is a more preferable option to engaging in a bidding war. However, further price increases in the new construction market could cause some prospective buyers to consider a fixer-upper in lieu of a turn-key property.