Home Builders Ask: Where’s the Land?
Date Posted: July 15, 2021
Posted In: Discussion,
From ProBuilder: North Carolina-based McKee Homes opened its Seaside Bay community last year, and the homes on 60 sites there have been “selling like crazy,” says president Trish Hanchette. A handful of homes are built and occupied, and build-out is slated for late 2022.
But obtaining the land for this wooded, gated neighborhood in Supply, N.C., was no stroll in the park. It involved negotiating 56 individual contracts with landowners over several years. With that, this distressed property located 40 minutes from Wilmington wasn’t a sure bet to attract buyers, even with access to a natural lake.
But in a housing market where land is expensive, lots are scarce, and even raw parcels are a competitive battleground, private builders like McKee Homes must be flexible about the land they pursue and the product they build on it. “We form our strategy around the land instead of trying to fit the land to our construction,” Hanchette says, as evidenced by the company’s diverse product mix.
New-Home Lots at a Premium
By some estimates, lots available for new-home construction declined by about 14% in 2020. “Lot shortage is the No. 1 threat to fulfilling sales commitments and growth objectives among the builders we talk with,” says Jody Kahn, SVP of research at John Burns Real Estate Consulting.
Lack of lots, like the current dearth of new-home inventory, is driving prices to new heights, with public and national builders paying top dollar (and then some) for the most-coveted finished lots in master planned communities (MPCs).
“What was selling for $15,000 to $40,000 per acre a few years ago is now selling for $90,000 to $100,000,” says Barry Bialik, founder of Compact Cottages, an Asheville, N.C.-based builder specializing in homes that average 1,500 square feet.
Compact Cottages is a prime example of how builders are making the most of the land available to them; that is, acquiring parcels that are too small or too remote for larger players in the market. The company is currently building on 2 acres in Asheville that Bialik acquired five years ago. That land had two houses on it, which were razed to make way for 45 narrow, detached and duplex housing units. As of mid-April, nine homes were completed and occupied, and another 22 are under construction. Other tracts include 1 acre that will yield five homes, 1.25 acres platted for eight to 12 homes, 2 acres for five to six homes, 1 acre for eight to 16 homes, and 1 acre with an as-yet determined density.