With median new home prices in the 400-500k range lot prices across the US for production homes is 88k min to – 130k – cost to deliver a 53 foot lot in many markets exceeds $60,000.

The study does not apply to the nation’s major building markets and we must hear more about the methodology coming up with 50’s k per lot.

Thanks for the reply. I found two land acquisitions for townhome development that show a pretty high raw land cost:

Riverline Townhomes: In May 2019, West Hollywood Development purchased the 3.7-acre, RG-2-zoned site for $2,500,000. The sale involved an assemblage of 18 lots containing quadraplex buildings. This was $675,676/acre for a 52-unit project. The raw land price was $48,077 per townhouse lot. The townhomes developed feature 2,175 SF, two-story, 3 BR units with a full finished basement. They are priced from $520,000 to $600,000.

Milestone Parc Townhomes: In December 2019, Piedmont Residential purchased the 1.44-acre, OIC-zoned site at the corner of Webb Road and Deerfield Parkway in Milton, Fulton County, GA 30004, for $679,250. The sale involved 3170 Webb Road. This was $471,701/acre for a nine-unit project. The raw land price was $75,472 per townhouse lot. The townhomes being developed feature 1,728 SF to 1,827 SF, three-story, 3 BR/2.5 BA units with a one-car garage and craftsman-style exteriors. They are priced from $520,000 to $600,000.

These two projects are inferior compared to the subject’s location, although the Milton land reflected a higher land cost than my subject ($56,818/lot).

I also found four other sales in much inferior Atlanta location that reflected lower per lot raw land prices.

Since it’s not likely that an appraiser can find small batch TH lots to build out, I’ve found that applying a Lot-to-Home Price ratio to the target market price of the finished TH unit, the contributory value of the lot can be estimated. And the value will include developer’s profit.

Thanks again. Have a great weekend.
PB

This is a great point! I do not have the hard numbers to prove it (yet) but some trends on the national level seem to support your story. We noticed that in recent years AVERAGE sales prices of single-family detached (SFD) and attached (SFA) homes have been converging. That seemed counterintuitive, given that SFD homes are considerably larger, on average, around 30%. The reasonable explanation is that townhomes are built on more expensive land/lots, and L-H-P are higher for townhouses.

Last time NAHB surveyed its members on construction costs was in the fall of 2019. At that time the results showed that finished lot costs were about 19% of the sales price but the survey sample was not large enough to differentiate between SFD and SFA homes.

I was thinking as you are. The less than one acre site for the 22-unit TH project I’m appraising was bought for $1,250,000, and the per lot development costs are reported to have been $60,000. That’s a going in cost of $56,820/lot for raw land, so without developer’s profit the per lot cost is already $116,820.

Have NAHB authors tracked ‘Lot-to-Home-Price ratios’ recently? A couple years ago the typical non-urban L-H-P ratios were from 20% to 25%. Since the lots are well-located, a 33% ratio doesn’t seem to be out of line. I would like your opinion.
Thanks, and have a great weekend.
Philip

Completely understand that. Just did seem really low even for spec or production builders lots. Utah doesn’t have cheap lots anymore, so understand we are higher than a lot of ares also. Thanks for the feedback!

As mentioned in the post, the analysis is limited to spec homes sales and does not include custom homes. Custom homes are typically built on larger lots (often owner’s land, not necessarily a typical lot) that would, undoubtedly, make them more expensive.

Also, as mentioned above, the reported values are medians, meaning half of the lots in the division sell for more than the reported medians.

The Census does not report values for individual states or metro areas, only for the entire divisions. Some areas are likely to be clustered at the higher end of the distribution, while other areas will be clustered at the lower end.