New home slowdown curbs growth of lot prices

LotsBy Kris Hudson | The Wall Street Journal

The slowdown in sales of newly built homes since last summer has sapped momentum from the land market, as home builders are starting to balk at paying increasingly lofty prices for lots.

The trend stands to slow the rise of new-home prices, which have increased since 2011 and now are at 2008 levels, an average of more than $300,000 this year, according to the U.S. Census Bureau. Land typically accounts for up to 40% of the cost to build a home.

Since the housing market began recovering in 2011, investors have been bidding up the price of finished lots, which are home pads outfitted with infrastructure such as utilities and sewer pipes and thus ready for construction. But with new-home sales and prices cooling, some builders are renegotiating land buys to get lower prices or even walking away from deals.


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