"While new home prices nationwide slipped 1% in the second quarter, the report showed that lot prices have continued climbing. Land in prime locations (A-B) rose 6% year-over-year, while prices in outlying areas (C-D) grew 4%. Analysts say lower construction costs have enabled builders to pay more for land even as profitability narrows. Scarcity of developed lots has also propped up pricing."
"Builders are being more cautious, and sellers are not conceding on prices, a Boise, Idaho, broker said. A broker in Charlotte, North Carolina, said builders have become significantly more conservative in their underwriting for B-C locations. A-B locations remain in high demand, but there seems to be a growing disconnect in seller pricing expectations and what builders can pay, they said."
U.S. land demand has fallen to levels similar to late 2022, with only 28% of brokers describing demand as strong compared with 76% a year ago. Nearly eight in ten brokers report increased cancellations and renegotiations, and deals that made financial sense six months ago often no longer pencil out. New home prices slipped 1% in Q2 while lot prices rose—A-B lots up 6% and C-D lots up 4%. Lower construction costs and a scarcity of developed lots have supported lot pricing. Builders are underwriting more conservatively and seeking higher returns; buyers are securing delayed purchases and restructured contracts, while many sellers hold firm.
Read at www.housingwire.com
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