The Trend Has Already Begun…

So here we are at the beginning of yet another year. But will it be any different than any of the past few years? And what will happen to property prices? Is now a good time to buy?

All good questions. The National Bureau of Economic Research officially declared the end of the recent recession was in June of 2009. Sure didn’t seem like it for the next few years after that but things finally seem to be gaining a foothold and in some cases showing improvement.

If you have been reading the news or watching television lately you may have seen that housing is one of those areas showing improvement.

“Data through October 2012, released today by S&P Dow Jones Indices for its S&P/Case-ShillerHome Price Indices, the leading measure of U.S. home prices, showed home prices rose 4.3% in the 12 months ending in October in the 20-City Composite.” is deliberately not erased and remain in their places. text-align: center; color: #555; font-family: helvetica,arial,sans-serif;”>US Zillow Home Value Index

All good news for housing but what about land /lot prices. Well, this website is primarily dealing with residential parcels 50 acres or less. And being residential, their prices are linked somewhat to home prices. Smaller residential parcels like the ones you will find here will lag, but typically follow home prices.

Why is that? Well, let’s look at an example. Right now, in many areas, you can buy a nice quarter acre, undeveloped homesite for, let’s say, $5,000. But to get that lot ready to build a home on you have to clear it, level or fill it, maybe install a well and possibly a septic system. You will also need a survey, electricity, etc. and all of this can cost $50,000 or more.

Then, let’s say you want to build a 2,000 square foot house at around $100 a square foot or $200,000. So together with the land costs you are at roughly $250,000. But in today’s market you can buy a ready built 2,000 square foot house for only $180,000 or even less.

You can see how that math might depress lot prices for those wanting a house in the near future. It reduces the number of interested buyers which in turn keeps lot prices down. But as home prices begin to rise with demand, suddenly lot prices will follow as building a home becomes the less expensive option.

And that trend in housing has already begun.