U.S. home builders blame lots shortage as major risk to faster housing recovery

Most U.S. home builders believe that a shortage of buildable lots has emerged as one of the key factors holding back a more robust housing recovery, a survey showed Wednesday.

The survey, which was conducted by the National Association of Home Builders (NAHB) among 341 people in August, found that 59 percent of the respondents said the lots supply in their markets was low or very low, up from 43 percent last September. "One reason is that many residential developers left the industry, abandoned certain markets or simply stopped buying land and developing lots during the downturn," said NAHB Chief Economist David Crowe.

The shortage had also translated into higher prices for builders who were able to obtain developed lots to build on. Ultimately, higher lot prices were passed on to buyers in the form of higher house prices.

The shortage of buildable lots had emerged against the backdrop of a housing recovery that was still modest by historic standards. So far housing starts have recovered from a low of 550,000 in 2009 to an annual rate of just fewer than 900,000. Historically, starts averaged over 1.5 million a year from 1996 to 2000, without ever plunging below one million until 2008 when the U.S. economy went into recession.

Apart from the lots shortage, other barriers included a shortage of labor in carpentry, limited availability of loans, and the recent uptick in interest rates, according to the survey.