From the WSJ:
The prices home builders pay for single-family lots hit a record high in the U.S. last year, a sign that a scarce supply of developed land is pushing up the cost of new homes.
Median single-family lot prices were $45,000 last year, surpassing the previous peak of $43,000 at the height of the housing boom in 2006, according to an analysis of the most recent census data by the National Association of Home Builders.
The dynamics of this expansion, however, are far different from a decade ago.
Prices for developed lots in 2006 were driven up by record levels of demand: Buyers had easy access to credit and builders rushed to deliver as many new homes as possible.
This time, there is more caution. Builders last year began construction on 714,500 single-family homes, less than half as many as in 2006. That suggests lot prices today are being pushed up by low inventories of developed land.
Builders responding to a national housing-market survey in May reported the lowest supply of lots since the survey started in 1997.
Prices have hit record highs even as the typical lot has been shrinking. Median lot sizes for single-family homes last year dropped to 8,589 square feet, the lowest since the Census started consistently tracking the data in the early 1990s.
Some of that reflects changing preferences of both home buyers and builders, who so far in the recovery have tended to cluster more in core urban and suburban markets where land is less plentiful.
Because of the higher price tag for the land, Mr. Donnelly said he has to think smaller to keep home prices in check for potential buyers.
“Really the only way to stay affordable is to increase the density and reduce the size of the houses,” he said.