“The land market is cooling fast,” says John Burns Consulting.
Please consider Land Prices Set to Decline
- Collapsed demand: After two years of fierce competition, land demand has collapsed by nearly two-thirds.
- Similar to late 2022: Only 28% of land brokers report strong demand in their markets, down from 76% just one year ago. We saw a similar decline in late 2022.
Builder margins under pressure
Lot prices have been slow to adjust to declining builder profitability. While new home prices are now down -1% nationally, as of 2Q25, lot prices rose +6% in the best locations, and +4% in farther-out locations. These lot price increases are partly due to lower home construction costs, which have allowed builders to pay more for land. Developed land has also remained in short supply in many markets, supporting price growth.
Nearly 8 in 10 land brokers report more transaction cancelations and renegotiations than normal. Deals that made financial sense six months ago no longer work today.
Land brokers confirm how shifting conditions have stalled the market, with buyers and sellers often far apart on pricing expectations. See below for broker commentary:
- Boise, ID: “I sense our market is in a bit of a standoff. Builders are being more cautious, and sellers are not conceding on prices.”
- Charlotte, NC: “Builders have become significantly more conservative in their underwriting for B-C locations. A-B locations remain in high demand, but there seems to be a growing disconnect in seller pricing expectations and what builders can pay.”
- San Diego, CA: “The market has deteriorated quickly. Absorptions are down, and builders are raising their required returns, thereby affecting the prices they can pay.”
Finished Lot Prices vs New Home Prices
New Homes For Sale By Stage of Construction
The supply of completed homes for sale is the most since July of 2009.
I don’t consider vacant land a home for sale, but the census department does.
Of the alleged 499,000 homes for sales, 111,000 have not been started. The other numbers are historically on the high side.
With new home prices falling and speculative building high, demand for more lots is dropping.
New Homes for Sale Supply
The Census Department calculates a 9.2 month supply at the current rate of sales.
I suggest 7.1 months counting only firm commitments to build. Finished supply is high and rising.
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On August 26, I noted Case-Shiller Home Price Index Drops Fourth Straight Month, Top Is In
It’s over. The fat lady has sung.
Demographically, the upcoming boomer die-off will add tremendous supply to the housing market. Shutting down the border will slow the rate of current demand.
And a tariff-enhanced recession will kill demand for everything.
I have some handy Friends that purchased fixers and have been renting for quite some time. They’re now up in age like me, and don’t wish to play renter any longer, and don’t need the steady additional income, as they are retired.
Both children are too young to wish to own, or have already purchased themselves. They seem to think from talking with like minded friend’s and acquaintances, this is not an uncommon phenomenon if you will. Just one of the Boomer side effects…
in the absence of growth opportunities… , those with money to spend and to invest now begin to demand more for their money or they sit on their hands and wait even longer to get more later
“the= time is my friend mentality” spells doom for those in debt or are mal- invested
now you and us all find out the truth
if you cant make more money thru growth , you can beat the guy in debt out of his equity if he has any
Fees for new residential construction are so high in Colorado that a decrease in land costs won’t make much of a difference in builder costs.
Rents in Las Vegas are finally starting to drop. A home in my complex with the same layout and a little nicer interior just rented for $150 less than what I’m paying. Homes going months before they finally find a renter after price drops.
It’s already started…the video link below is worthy of a watch. The host has clips of people completely depressed at their current economic state. Most say they don’t have money to spend on anything beyond basic necessities.
The sad thing is Trump and the demographic death spiral will make things 10x worse by 2030 so if these people are struggling now, they will be in deep trouble a few years from now.
https://www.youtube.com/watch?v=thOTmZ7TON8
Hmmm…what could these people possibly do?
Question, the article states builder construction costs have come down. That’s hard to believe. I do not think that’s accurate.
I am in construction and I can believe it. Lumber is way down, and since I am now getting calls from guys looking for construction work, that means that labor prices could be softening too (that’s what it usually means anyway).
Thanks, good to know.. How much of a percentage decrease in home price does it translate to?
Won’t the Fed just keep re-inflating the two main asset classes of the wealthy; stocks and real estate?
They will want to do that. Whether they can is an open question.
The Fed will (hyper) inflate everything trying to reanimate this corpse.
They might succeed – if you dare call it that.
Nothing that doesn’t raise the income of the average American will work for much longer.
Golden Age, or Great Trumpression? It’s just so dang hard to call…
Land approved for construction can stay vacant for years. It might become a dumpster, a junk yard , near major cities. CRE loan for land to build cost more bc it isn’t liquid, it isn’t a good collateral. Sales are rare, especially in a downturn.
C/S pairs: bought in 1995/ sold in 2025 or bought in 2012/ sold in 2025 are becoming rare. Zoomers and young millennials don’t care.
It won’t matter how low a mortgage rate someone got when they have no job to make payments.
It won’t matter how low mortgage rates go when an owner is trying to refinance a house that has fallen in value below what is owed. Banks won’t allow it.
*cackles in Blackrock*
Market cools but prices in USD will continue to go up as dollar continues to lose value.
Test that theory out 2006-2008
One difference between now and the 2000s was house price increases in 2000s outpaced construction inflation. So in theory there was room for new home prices to fall after the bubble popped. Basically there were fat margin for the house builders. But construction cost have risen fast that past 5 years. We may have some price corrections from a recession but when the recession is over, builders are not going to build a house at a loss. Based on this graph, there was room for new homes to fall in 2000s but it actually looks like new housing might be priced correctly in 2025.
https://fred.stlouisfed.org/graph/?g=1M9q2
This is just a quick analysis with just two data points and I could be wrong.
But, it is possible that construction material price could drop but the chart does not indicate that
As the dollar’s value collapses, everything will go up when priced in USD. Even as US demand collapses as the Global South roars.
Except that the demographic situation is way, way worse now, and that fact will overwhelm the effect you have identified, which may or not even be true or correct. Ultimately, what a structure costs to build does not actually affect its final selling price. There can (and always does) come a point where a houses begin to sell for less than what the materials and labor would be to build it.