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Lot Prices Hit Record Highs as Mortgage Rates Enjoy Near-Record Lows

Incredibly low mortgage rates have been all over the news lately. People are hurrying to buy their first homes, refinance their higher-interest mortgages, and even take out second mortgages thanks to new lower rates. However, even as these rates have fallen, the overall prices and values for lots has risen. Here’s what you should know about lot values and the reasons why they’re becoming so expensive.

lot prices 300x151 Lot Prices Hit Record Highs as Mortgage Rates Enjoy Near Record LowsWhat Is a Single Family Lot?

When you see a lot advertised as a “single family lot”, this simply means it’s designed for building a single-family home instead of an office building, an apartment building, or even a duplex. Lots are just that – pieces of land that have not been modified for homebuilding in any way. If you choose to build a home, you’ll need to think about average lot prices. These prices are also figured into the overall value of a home when it is put on the market for sale.

How Much Do They Cost?

Each census, the census bureau performs what is known as a Survey of Construction, or SOC, which provides information about how many people are building new homes and the amount they’re paying for their lots. The National Association of Home Builders, or NAHB, analyzed data provided by the census bureau in 2015, which shows that average lot prices have climbed above $45,000 – the highest amount on record.

Why the Increases?

Many people are baffled by the record highs. After all, lots across the country are getting smaller, and new home production is well below what is considered the “normal” level, so they believe that lot prices should theoretically drop. Why is the opposite happening? It all has to do with the number of lots available for purchase. The NAHB reported back in May that there is a significant shortage. What’s more, regulatory costs are also on the rise, and these play a role in determining lot value, too.

Should You Still Buy a Lot?

Although there’s no denying that you’ll pay more for a lot now than you would have a few years ago, it’s still a great investment as long as you’re going to build a house on that lot. Home values are still appreciating nicely, and since the overall value of the lot is factored into the property value as a whole, there’s no reason to avoid buying such property – it is still a wise investment.

Should You Wait It Out?

If you’re waiting patiently for lot values to drop so you can get the building ball rolling, consider the fact that new home construction is still falling and regulatory costs are still rising. This means you might be waiting a while. According to analysts, paying more for a lot now won’t really hurt you in the long run, even if prices happen to fall drastically in the next few months. Once again, it’s not the lot that makes the difference – it’s the home built on that lot.

Mortgage rates are falling across the country, but lot prices are on the rise for a number of different reasons. In fact, they hit a record high in 2015 and there seems to be no sign that they’ll fall again any time soon. Fortunately, this shouldn’t make or break your decision to build a new home.

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