Land on Hand – US Housing Market
To add to other growing pains in the current American housing market, land shortages have now been on the rise across the United States. Specifically, this applies to land used for housing, where land-use restrictions and lack of public infrastructure have made an environment where the Great American Frontier has scarcity in one of the most valuable commodities to exist.
In the Sunbelt alone, the price of vacant land per acre has doubled in the past two years, and higher interest rates and other costs can continue to influence the price of dirt. Economists say that the lack of supply for available land and growing demand may continue to drive these prices up in the long term. One statistic shows that land, on average, accounts for roughly 47% of U.S. home values, which is up from 38% in 2012 and 20% in 1960. Land-use restrictions don’t make the problems better. With several zoning laws in effect in large metropolitan areas, the land is restricted to only being used for other buildings. With the rise of vertical cities like New York and San Francisco, one can see that you can’t stack homes on top of each other. This requires more land for each housing unit, which drives up prices along with high demand. Inadequate infrastructure also plays a role, as cities that don’t develop proper public transportation or traffic-reducing roads can cause buyers to favor city centers, where land is already scarce.
With the Fed’s transparent plan to slow down inflation and the economy, one can only hope that this will have long-term benefits for land prices in the coming future.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.