Housing Boom Sparks Fears Over Lack of Land for New Homes

Housing Boom Sparks Fears Over Lack of Land for New Homes sign pointing to new homes for sale A sign is posted in front of new homes for sale at Hamilton Cottages on September 24, 2020, in Novato, Calif. (Justin Sullivan/Getty Images)

By Jeffrey Rodack | Friday, 25 December 2020 02:20 PM

Builders are growing worried they are running out of land to meet the surging demand for new homes.

The Wall Street Journal reported record low interest rates and a new premium on space during the pandemic have generated the biggest housing boom in years.

And a shortage of previously owned homes on the market is leading to an increase in buyers wanting new construction.

Builders, with much of their land inventory still in the development process, face the prospect of a shortage of finished lots or land that can be built on, said Jody Kahn, senior vice president at John Burns Real Estate Consulting LLC.

And Phillippe Lord, chief operating officer at Scottsdale, Arizona-based builder Meritage Homes Corp. said: ''The competition for land is extremely high as the homebuying demand grows.''

New home sales soared 20.8% on a year-on-year basis. The government reported last week that single-family homebuilding, the largest share of the housing market, increased in November to the highest level since April 2007.

But persistent shortages of land, materials and skilled labor are increasing construction costs for builders.

Luke Pickerill, owner of MonteVista Homes in Bend, Oregon, said: ''In Central Oregon, I will literally be out of lots and I’ll have nothing to sell'' by next month. ''All of the inventory that we expected to be selling in quarter one and quarter two of next year, we’ve now sold through it already this year.''