The rebounding housing market has sparked a sharp rise in land prices, creating big profits for land investors but putting pressure on builders to further increase the price of new homes.
In a recent report published by housing consultancy firm, Zelman & Associates, land values across the country have increased by 13%; the first annual gain since 2005. This increase is putting pressure on homebuilders across the United States to further increase the cost of new homes. For consumers, costlier land means more-expensive houses. Land cost constitutes 21.7% of the final sale price of a new home, according to the National Association of Home Builders. As land prices rise, builders tend to pass 100% of those costs on to consumers. Buck Horne, a housing analyst with Raymond James & Associates, predicts that new-home prices will rise 10% to 15% in 2013, chiefly because of rising demand and because of the scarcity of land. “Buyers who can’t afford to pay up now are going to have to wait. Maybe they’ll have to rent for awhile,” Mr. Horne said. “They may miss out on the first stage of price appreciation.” Whelan, R. (2013, April 9). U.S Land Gets More Expensive. The Wall Street Journal Web. 13 May. 2013