Home builders

Lack of developable land is one of the biggest constraints for home builders

Potential buyers will be severely constrained by soaring house prices, rising interest rates and a noticeable shortage of developable land, said Mike Moser of Starwood Land Advisors in a report. recent discussion with John Burns Real Estate Consulting.

Moser told JBREC’s Dean Wehrli that new home sales would likely fall below 800,000 this year and likely not accelerate much in the short term. He says the increasingly cumbersome law processes in municipalities of all sizes are partly to blame.

“I don’t know how we’re going to see 1,000,000 like we saw in 2004 and 2005,” Moser said. “I don’t think there is enough land on the way, I don’t think it’s licensed and designed and can come out of the allocation process quickly enough. And that’s what you’re seeing right now… the biggest shortage in the supply chain is land.

Moser said that while material shortages continue to plague builders, from a developer perspective “we are trying to put as many lots in the field as possible. And as soon as they are put on the ground, they are redeemed. In other words, a land shortage is the biggest bottleneck in the sales cycle.

It’s a sentiment confirmed by data: a A recent National Association of Home Builders survey shows that 76% of builders rated the overall supply of developed land in their areas as low to very low⁠ – an all-time high since the NAHB began collecting data in 1990s. The previous record was 65% in 2018.

About 46% of single-family home builders said the supply of land in their area was just low, and 30% said it was very low.

Moser also commented on the price increases, saying markets with 20-25% price appreciation in the past year are “dangerous.” He quoted Nashville, an MSA where some areas have seen their prices increase by 30% in the past year, for example.

“It’s now happening to a product that’s a $ 700,000 home… (and) the vast majority of those buyers have only ever seen rates of 3% or 4%,” he said. “And so if it’s down to five or six, that house that’s selling for $ 700,000 today has a bad day ahead.” “

Affordable, growth-friendly markets will fare better in the next business cycle, according to Moser.

“The last recession in Texas was, I’m not going to say unscathed, but not at all affected like Florida and Washington DC were. It didn’t have as much of an impact as in Washington than in Florida, ”he said. “So it’s going to be cyclical, and in different municipalities, everything will be different. “