Shortage of Lots Slows US Housing Recovery

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A shortage of buildable lots in the U.S. is one of the major factors slowing a solid housing recovery, according to the latest survey by the National Association of Home Builders. 

In the survey, 59 percent of builders reported low supply of lots, an increase from 43 percent in September last year. 

This is "the largest low supply percentage we've seen since we began conducting these surveys in 1997," NAHB chief economist David Crowe said in the release. "One reason is that many residential developers left the industry, abandoned certain markets or simply stopped buying land and developing lots during the downturn."

The shortages of lots tend to be in the most desirable, "A" locations, where 34 percent of builders said supply was very low. This compares to 18 percent for lots in "B" locations and 12 percent in "C" locations. 

The lower number of available lots has translated to higher prices for builders, NAHB reports. The survey found 34 percent of home builders said the price of developed A lots was higher than last year. Higher lot prices eventually mean high home prices for buyers, which are expected to stay on their recent upward trend. 

Overall, home builders have reported confidence in the country's housing market recovery. The number of housing starts increased 20.9 percent in July compared to last year while building permits also went up.

However, home builders may have more than lot shortages to worry about in responding to an increased demand, NAHB says. 

"There is still a substantial pent-up demand for housing waiting to be unleashed as the overall economy and labor situation improves," Mr. Crowe said. "Other barriers [for builders] include a shortage of labor in carpentry and other key building trades, limited availability of loans even for credit worthy home builders and home buyers; and, more recently, an uptick in interest rates."