Housing markets across the U.S. are booming with high demand and low inventory, and it’s sent land prices into a frenzy.
Land is a hot commodity right now, as the lack of homes for sale continues to push affordable housing out of reach for many first-time homebuyers and low-wage workers.
According to a report by the National Association of Realtors (NAR), the U.S. fell short of an estimated 5.5 million new units from 2001 to 2020 compared to 1968 to 2000. When the housing boom cemented last year, supply began severely underserving demand.
“When housing demand really accelerated in May, June and July of last year with historically low interest rates, the industry couldn’t simply turn on a dime and suddenly build 30 percent more than they were a quarter, or a year ago,” Robert Dietz, a chief economist at the National Association of Home Builders, told Inman.
Thus, the game of catch-up began.
But in a rush to build, where are developers looking?
A new report by realtor.com found the top 10 markets developers are betting big on by analyzing where land prices are rising the most. To do this, the data team looked at average price-per-square foot increases from the first half of 2020 compared with the first half of 2021 in the 100 largest US metros.
The metros that made the list are located all over the country, from the City of Angeles to Upstate New York.
Average price-per-square foot increase: 92 percent
Median price per square foot for land: $2.52
Sarasota sits on the Southwestern coast of Florida.
Because of rising home prices in major metros like Miami, the area has been seeing an influx of homebuyers searching for affordability.
In May, Florida-based moving company Bekins South found that the number of relocations from the tri-county area (Palm Beach, Broward, and Miami-Dade counties) to more affordable spots on the west coast and in northern parts of the state had increased by 108 percent year over year.
But as a result of the desire for affordability and the rise of remote work, prices in Sarasota are now skyrocketing. According to a recent report by the Sarasota Herald-Tribune, the median sales price for single-family homes in Sarasota County hit $407,000 in May, a record high.
As realtor.com reported, builders and developers are racing to keep up.
“We have a lot of builders in the area, and at this point, they’re inundated with contracts to build homes 18 months to two years out,” Sharon Rodgers, a Sarasota Realtor, was quoted in the report.
Average price-per-square foot increase: 72 percent
Median price per square foot for land: $9.17
Like most markets across the country, homes in Portland are flying off the shelves and plots of land are selling like hotcakes.
As realtor.com reported, because of zoning laws, land to build on, in and around the city, is even more scarce.
And it’s not just single-family homes that need to be developed.
The demand for housing in Portland is causing some to fear major rent hikes in the near future. Per a June report by KATU, there aren’t enough permit applications for multifamily buildings to keep up with the projected rental demand.
“The writing is on the wall that there are not very many permits being pulled for new homes, that gets us worried that maybe we’ll repeat the cycle we did 10 years ago,” Eli Spevak, an affordable housing developer and chair of the Planning and Sustainability Commission, was quoted in the report.
Los Angeles, California
Average price-per-square foot increase: 67 percent
Median price per square foot for land: $1.38
There isn’t a lot of land left to build on in Los Angeles, realtor.com reported, and it’s causing prices to spike.
Per the report, Los Angeles will need 207,000 more housing units by 2025 to match the growing demand. Buyers are so desperate for space, they are venturing into dry, rural areas that are more prone to wildfires.
To put the price hike into perspective, realtor.com points to a half-acre plot of land in Sunland, a market on the outskirts of the city. Per the report, the lot is asking for $1,350,000, more than double the amount it sold for in 2019.
Boise City, Idaho
Average price-per-square foot increase: 52 percent
Median price per square foot for land: $3.06
Per the realtor.com report, in May, the median price of a home in Idaho passed $500,000 for the first time ever.
The boom in demand has sparked major interest from builders and developers who are snatching up available land.
“I love these foothills,” a Boise native told KTVB7. “We no longer get to see our pretty foothills. You see houses. We can’t say, ‘You can’t come to Idaho,’ but I wish that we could slow down, take into account what we do have, keep it pristine. Because otherwise, it’s just going to be another California.”
Raleigh, North Carolina
Average price-per-square foot increase: 50 percent
Median price per square foot for land: $1.71
Raleigh has been a hot spot for tech employees over the past few years and saw an influx of them during the rise of remote work in 2020.
“Raleigh has great employment opportunities for tech workers, and housing is a lot cheaper,” Ali Wolf, chief economist at Meyers Research, told realtor.com. “But it’s not cheap for people who already live there—those out-of-towners have driven that interest and prices up.”
Homes in Raleigh are selling in four days, ABC 11 reported, making it one of the most competitive markets in the U.S.
In fact, demand has risen so significantly, the city may change zoning laws to allow for the construction of multi-unit buildings in primarily single-family markets.
Syracuse, New York
Average price-per-square foot increase: 50 percent
Median price per square foot for land: $0.40
Home builders are busy in Upstate New York, especially in Syracuse, Spectrum News reported in June.
“Buffalo, Rochester, the Capital Region, specifically Syracuse are very busy for our builders and remodelers,” Lew Dubuque, the executive vice president of the New York State Builders Association (NYSBA), was quoted in the report.
Per the NYSBA, over the past year, the number of new builds in the Northeast region has gone up by 43 percent.
In addition to demand driving up prices, the rising cost of materials is making new builds more expensive.
In fact, housing affordability is becoming so out of reach for some, Mayor Ben Walsh has launched the Resurgent Neighborhoods Initiative. The program will construct 50 single-family homes for lower-income residents in Syracuse with state and federal funds footing a good portion of the bill.
Average price-per-square foot increase: 47 percent
Median price per square foot for land: $0.43
The local job market in Spokane is strong.
According to realtor.com, Amazon brought around 4,000 jobs to the area over the past year and plans on bringing around 1,000 more.
Local jobs paired with remote workers moving to the area has caused home prices and buildable land increasingly valuable.
“We’re at the lowest level of inventory in the history of Spokane County,” government affairs director for the Spokane Association of Realtors, Darin Watkins, told AP.
In May, the Wall Street Journal/realtor.com Emerging Housing Markets Index ranked Spokane County number five on its list of US metros where home prices are rising the quickest.
Average price-per-square foot increase: 41 percent
Median price per square foot for land: $0.72
Chattanooga is a magnet for out-of-state movers as well as city dwellers from Atlanta.
Per realtor.com, the market has been eyeing infrastructure investments for years. From 2000 to 2009, the city invested $120 million to revitalize its downtown riverfront.
While Chattanooga has long been growing in popularity, the market picked up momentum during the pandemic.
According to a June report by the Chattanooga Times Free Press, over the past year, residential rent in Chattanooga increased twice as fast as the national average.
“People are finding Chattanooga as a place to come and live and we’re getting a lot of people moving here, fortunately, or unfortunately depending upon your perspective,” Robert Backer, president of the Greater Chattanooga Association of Realtors, was quoted in the report. “There has also been a tremendous interest among investors wanting to buy into our rental market, often at much higher prices than what the former owners paid, and that has also tended to push up rental rates.”
Average price-per-square foot increase: 36 percent
Median price per square foot for land: $0.80
Birmingham has been a hot spot for tech workers, realtor.com reported, with companies like Prepaid2Cash Holdings and HealNow buying up office space there.
The influx of workers has driven up home prices by more than 10 percent since last year. From May 2020 to May 2021, home sales in the area increased by 33 percent.
In addition to rising demand, rising material costs are making new builds more expensive.
“I’ve been associated with the building industry for close to 40 years. We’ve always had challenges along the way but this one ranks right up there because we’ve never seen this before,” the executive vice president of the Home Builders Association of Alabama told ABC.
Average price-per-square foot increase: 35 percent
Median price per square foot for land: $6.14
Philadelphia is particularly attractive to homebuyers, realtor.com reported, because of its close proximity to New York City and Washington, DC.
Demand for homes in the area right now is so intense that prospective buyers are warned that they’ll likely face bidding wars.
In April, NBC reported that the typical market price of a home was $210,714, which was a 20.86 percent increase since the onset of the pandemic.
Per realtor.com, in addition to demand, new developments on the outskirts of Philadelphia are causing lot prices around the metro to go up.
“Land is at a premium because Philly is a long-established area—there’s just not a lot to build on,” Joseph Smogard, founder of My Philly House at Compass, was quoted by realtor.com. “Now we’re absolutely seeing more people sprawling from the well-established areas to new towns a little farther out.”