Demand for Residential Land Drops-What You Need to Know

"The demand for residential land in the U.S. has significantly decreased, indicating a potential slowdown in new-home construction, according to a recent report from John Burns Research and Consulting. The declining demand for lots is closely tied to a reduction in builder profitability and persistent high land costs. This shift in the market landscape has implications for both builders and buyers."

"The demand for residential land has dropped by nearly two-thirds, impacting new-home construction in the U.S. Lot prices have remained high despite declining builder profitability, contributing to the decrease in demand. Builders are experiencing shrinking profit margins, leading them to reduce construction starts and adjust land purchase strategies. The current market conditions are characterized by increased transaction cancellations and renegotiations, indicating a standstill between buyers and sellers. The cyclical nature of the market suggests that falling new-home prices will eventually bring down land costs."

Demand for residential land in the U.S. has declined substantially, signaling a slowdown in new-home construction. Reduced builder profitability and persistently high land costs have driven a sharp fall in lot purchases. Builders are cutting construction starts, altering land acquisition strategies, and preserving margins amid tighter economics. Market activity shows more transaction cancellations and renegotiations, producing a standstill between buyers and sellers. High lot prices continue despite weaker demand, keeping margins compressed. Over time, market cyclicality suggests falling new-home prices will reduce land costs, which could eventually enable lower new-home prices and renewed building activity.

Read at SFGATE