The housing market has completely rebounded and nationally home prices have risen 49.9% according to CoreLogic. The next challenge that builders have been facing is a labor shortage in the construction market and an increase in materials, especially after this year’s hurricanes and wildfires. To offset this cost, builders and developers alike have been looking at setting a new trend called densification. This basically means that because of the scarcity of lots available to build, builders and developers must divide up the lots that they can purchase to put more houses on each lot, thus reducing the overhead cost and property taxes per house that they build.
Home prices have come completely back to the record high that they were in August, 2006, before the housing market crashed. For this reason, it is lucrative to be in the home building and real estate industries right now. However, depending upon what market you are in, home prices may have been on a continual increase, or some builders may have seen a volatile up and down trend in their local community’s home prices.
According to the Census Bureau’s Survey of Construction (SOC), the following statement was issued.
“The median lot size of a new single-family detached home sold in 2016 stands at 8,562 square feet, or just under one-fifth of an acre. This is a new record low and a small decline since 2015, when the median lot size fell under 8,600 square feet for the first time since Census Bureau’s Survey of Construction (SOC) started tracking the series for single-family detached homes.”
By reducing overhead costs, builders and developers will be able to make more profit. Thus, shrinking lot sizes is one answer to reducing these costs. However, some communities have covenants which require a certain lot size, or pre-engineered plans have delineated the size and scope of the lot and house in new developments, so the trick is to be a crafty business professional and seek out opportunities to rezone lots to a smaller size.