Over the past couple of years, the Metro Detroit real estate market has weathered its fair share of challenges, from the impact of COVID-19 to soaring material costs, a shortage of skilled labor, and frustrating supply chain delays. Yet, there’s a new challenge on the horizon that threatens to make new home construction even more challenging: a shortage of available lots for building new homes.
In a recent survey conducted by the National Association of Home Builders (NAHB), a striking 76% of Metro Detroit’s builders reported that the overall supply of developed lots in their area ranged from “low” to “very low.” This statistic is not only a record high but also a significant departure from the previous record of 65% recorded in 2018, according to NAHB data.
Digging deeper into the survey, it’s apparent that single-family builders in Metro Detroit are feeling the pinch. A substantial 46% of them characterized the lot supply as “low,” with an additional 30% describing it as “very low.”
To gain a more nuanced understanding, builders were also asked to evaluate the supply of A, B, and C lots in the areas where they operate. As expected, shortages were most pronounced among “A” lots, those considered the most desirable due to their prime locations. This year, an astonishing 74% of Metro Detroit builders reported that the supply of “A” lots was either “low” or “very low.” Similarly, 67% indicated shortages for “B” lots, and 57% for “C” lots. These figures represent record highs across all three categories, emphasizing that the challenges related to lot supply are widespread, regardless of location desirability.
Adding to the complexity, Zonda, a reputable firm specializing in housing market research and real estate analytics, reported that its New Home Lot Supply Index (LSI) hit an all-time low in the first quarter of 2021. The LSI plummeted by 24.2% year-over-year, reflecting the urgency with which Metro Detroit builders and their peers across the nation are acquiring finished vacant lots to meet the surging demand for homes.
The LSI, released quarterly, is constructed from proprietary data covering the production of the new home market across the United States. It gauges the supply of single-family vacant developed lots—those ready for immediate construction—in relation to equilibrium.
"The race to acquire lots is on as builders continue working to quickly get more homes on the ground. Competition for lots is fierce, but demand shows no signs of abating, further fueling construction activities."
In the first quarter of 2021, the cities that experienced the most significant tightening of lot supply on a year-over-year basis included Los Angeles, San Francisco, and Baltimore. With growing interest in for-sale properties, particularly in suburban settings, builders in these cities, much like those in Metro Detroit, have been swift to secure as many lots as possible. These three cities have emerged as the epicenters of the lot supply challenge among major markets.
In the midst of these formidable challenges, Vanguard Real Estate Group stands as an indispensable resource for Metro Detroit’s homebuilders and developers. With nearly two decades of invaluable experience and an unrivaled network of industry relationships, Vanguard Real Estate Group excels at helping builders acquire land at all stages of development—whether it’s raw land, entitled communities, or fully improved vacant lots. In an era where securing suitable lots is paramount to success in the construction industry, Vanguard Real Estate Group serves as the unwavering partner, guiding Metro Detroit’s builders and developers through the intricacies of the real estate market and ensuring a bright future for the region’s housing landscape. Our commitment to delivering unparalleled expertise and support remains unwavering, even in the face of these new challenges, because we believe in the growth and prosperity of Metro Detroit’s real estate market.
Michael DiNello
Co-Founder | Managing Partner
Mr. DiNello spearheads the company’s vision and directs development and brokerage operations. With nearly two decades of expertise in real estate brokerage, acquisition, and development in the Metropolitan Detroit market, his leadership is grounded in extensive industry experience.
