Without a doubt, land and lot pricing does NOT follow the home price decline experienced in most markets over the past several years. However, land and lot values reflect the availability of land suitable for development purposes.
Most developers can’t and will not wait for land to be rezoned regardless if the owner is willing to sell with this contingency. The local political environment will surely influence how communities grow in the future.
In the Baltimore area, lots are in short supply and with demand increasing, lot prices will start to escalate as the home building business continues to forge forward. In contrast, there are over 30,000 finished lots on the market in Charlotte, NC. Granted, many of these lots are in failed or stalled subdivisions which will be purchased by national builders with the intent of constructing smaller price sensitive homes.
In the Baltimore area the lot to home price ratio will be over 35% in many cases and in Charlotte, the ratio will be around 20%. The approach to building will be remarkably different simply due to the supply of land and lots. Builders in the Baltimore area may be seeking a certain dollar amount of profit while the builder in Charlotte will continue to seek a certain percentage profit.
In comparison, a developed lot in Baltimore may be in the range of $150,000 and in Charlotte about $50,000. The under supply of lots and land in the Baltimore-Washington DC area will continue to drive land prices higher; the vicious cycle in reverse. In contrast, the Charlotte market will again lag the national market but the lot supply will be exhausted and prices will again rise.
The bottom line for either market – if you are in the market for a new home, buy now. If you are investigating the purchase of a lot to build your home, buy now.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment