The demand for land is driving up prices—especially for prime lots in affluent neighborhoods.
Median list prices for land in the country’s top luxury markets were up 8.7% in the first half of the year compared with the same period last year, according to listings website Realtor.com. The South saw the steepest increases, with median asking prices up 13.33% from last year.
In the U.S. overall, the median list price for a lot in a high-end neighborhood was $635,000, according to Realtor.com. Beverly Hills, Calif., Southampton, N.Y., and downtown neighborhoods in Miami, and Chicago saw the greatest jump in median land prices in luxury markets, according to Realtor.com. (News Corp, which owns The Wall Street Journal, also owns Realtor.com, the listing website of the National Association of Realtors.)
Driving up prices is a shortage of vacant, developed lots in prime areas, according to a survey by the National Association of Home Builders, a trade group. Released in May, the survey found that 69% of the 333 home builders surveyed said “A” lots—the most desirable parcels because of their location—were in low or very low supply.
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The dearth can be traced back to the real-estate collapse that started in 2007, says Robert Dietz, NAHB’s chief economist. He says the finite supply of land and a lack of developer financing have contributed to the shortage.
“The legacy of the Great Recession was that banks weren’t lending,” Mr. Dietz says. “Even when the mortgage lending came back acquisition, development, and construction loans were tight for years.” When funds dried up, builders stopped or slowed the pace of developing land for future construction.
On the Hawaiian island of Oahu, beachfront properties near the commercial center in Waikiki, as well as land in the Diamond Head neighborhood are the most desirable, says Rodney Kim, vice president of Atlas Construction, a home builder based in Honolulu. “You have to look for bigger lots that can be subdivided,” Mr. Kim says. “Unless you go out into rural areas, you can’t find vacant lots, but that’s where zoning restrictions get more problematic.”