Booming Demand for Land in the US Real Estate Market

The US land market is currently experiencing a surge in demand, with more than half of land brokers surveyed describing it as "hot" or even "on fire."

The US land market is currently experiencing a surge in demand, with more than half of land brokers surveyed describing it as "hot" or even "on fire." After a period of cooling over the past year, the market for developable land is now red hot once again. In fact, interest in land deals has risen to a level not seen since early 2022, according to a survey conducted by John Burns Research and Consulting.

The survey, which involved 78 land brokers, revealed that 45% of them considered the market for land in the second quarter as "hot," while another 10% went even further, labeling it as "on fire." This represents a significant increase from the prior quarter, where only about 25% of brokers deemed the market as hot or on fire. It's important to note that the overall sentiment around land deals hit a low point in the fourth quarter of the previous year, with only single-digit percentages of "hot" ratings.

Several factors have contributed to the rapidly rising sentiment and increased land deal activity. Firstly, the current scarcity of existing homes in the market has created a sense of urgency among potential buyers and developers. Builders are now seeking to "reload" and embark on new developments, as they realize the immense opportunity in meeting the demand. Interestingly, it's not just major homebuilders looking for land; the single-family rental market is also a significant driver of this newfound national land market hotness.

Regional Differences in Land Market

The demand for land is not uniform across the country, with regional differences heavily influenced by supply factors. In the Northeast, land deals are exceedingly hot, followed by Southern California, the Southeast, and Northern California. On the other hand, Texas, Florida, and the Midwest have experienced a cooling down of the market.

The density of major urban centers in the Northeast makes them less conducive to suburban sprawl compared to rapidly growing metros in the West and Southwest, such as Phoenix and Las Vegas. These western and southwestern regions have witnessed a higher demand for new construction and land deals. However, even within regions, variations exist. For instance, while the Midwest overall has not seen as much demand for new construction, Indianapolis stands out with its robust market for new homes. Conversely, Cleveland presents one of the coolest markets for new homes in the region.

Buyers Turn to New Homes Amidst Competition

In the face of fierce competition for resales, buyers are increasingly turning to new homes to secure a place in the market. Realizing this shift in buyer preference, builders have responded by adding new inventory, a relief amidst the shortage of existing homes for sale. Agents, whose clients have repeatedly lost out in bidding wars for resales, now recognize new construction as a viable alternative.

The supply of existing homes shows little sign of significant increase in the near future, further enhancing the position of builders. With fewer available options in the market, buyers are seeking refuge in newly constructed homes that offer a chance to create their dream space without the intense competition faced in the resale market.

Final Thoughts

The demand for land is undeniably on the rise, with the majority of land brokers considering the national land market hot or even on fire. This surge in demand is primarily attributed to the scarcity of existing homes, urging both major homebuilders and those in the single-family rental market to seek new opportunities. Regional variations also come into play, with the Northeast emerging as the hottest region for land deals, followed by Southern California.

As the supply of existing homes remains limited, builders are plugging the gap by adding new inventory, giving buyers an alternative in a highly competitive housing market. The trend towards new homes is likely to continue as buyers search for opportunities to secure their own piece of the American dream.