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Share of Smaller Lots Record High Amid Pandemic

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While nation’s production of spec homes shifts towards smaller lots, the regional differences in lot sizes persist.

Despite the pandemic-triggered suburban flight and presumed shifts in preferences towards more spacious living, a rising share of new for-sale homes were built on smaller lots. According to the latest Survey of Construction (SOC), more than two thirds of new single-family detached homes sold in 2021 were built on lots smaller than one-fifth of an acre. This is the highest share on record and reflects stark changes in the lot size distribution since the Census Bureau started tracking these series 20 years ago when most single-family detached homes were occupying over one fifth of an acre.

The fact that a shift in speculatively built (or spec) home building towards smaller lots continued during the pandemic undoubtedly reflects unprecedented lot shortages confronted by home builders during the pandemic housing boom, as well as their attempts to make new homes more affordable.

The latest SOC data show that 67% of all new single-family detached homes sold in 2021 were occupying less than 1/5 of an acre. Going back to 1999, when the Census started tracking these data, the share was 46%. A persistent shift towards smaller lots, however, is a more recent phenomenon. The share of lots under one fifth of an acre was fluctuating around 48%, never crossing the 50% mark, until 2011. In contrast, the share rose rapidly during the last decade, from 50% in 2011 to 61% right before the pandemic and gained additional 6 percentage points during the two pandemic years.

A closer look at the lot size distribution during the last decade shows that most dramatic shifts took place at the lowest end, with lots under 0.16 acres increasing their share by 11 percentage points. In 2011, 28% of all sold single family detached homes were sitting on lots under 0.16 acres and additional 22% were occupying lots between 0.16 and 0.25 acres. Fast forward to 2021, these shares increased to 39% and 28%, respectively.

At the other end of the lot size distribution, the share of spec homes built on larger lots exceeding half an acre shrunk from 12% in 2011 to 8% in 2021. The share of lots measuring between a quarter and half an acre declined from 24% to 17% over the last 10 years.

The median lot size of a new single-family detached home sold in 2021 now stands at 8,456 square feet, or just under one-fifth of an acre. This is slightly larger but statistically not different from the lowest on record median of 8,177 square feet set a year before the Covid-19 pandemic.

While nation’s production of spec homes shifts towards smaller lots, the regional differences in lot sizes persist. Looking at single-family detached spec homes started in 2021, the median lot size in New England is four times as large as the national median.

New England is known for strict local zoning regulations that often require very low densities. Therefore, it is not surprising that single-family detached spec homes started in New England are built on some of the largest lots in the nation, with half of the lots exceeding 0.8 acre. The neighboring Mid Atlantic and more distant East South Central divisions are next on the list with the median lot occupying just under a third of an acre.

In the South, the West South Central division stands out for starting half of single-family detached spec homes on lots under 0.17 acres. This is significantly lower than the median lot sizes in the neighboring East South Central division where half of the lots exceed 0.29 acres.

The Pacific division where densities are high and developed land is scarce has the smallest lots, with half of the lots being under 0.14 acres. The bordering Mountain division also reports typical lots smaller than a national median, 0.17 acres.

The analysis above is limited to single-family detached speculatively built homes. Custom homes built on owner’s land with either the owner or a builder acting as the general contractor do not involve the work of a professional land developer subdividing a property. Therefore, in case of custom homes, lots refer to owner’s land area rather than lots in conventional sense. Nevertheless, the SOC reports lot sizes for custom homes and shows that they tend to have larger lots. The median lot size for custom single-family detached homes started in 2021 is just over one acre.

For the regional analysis, the median lot size is chosen over average since averages tend to be heavily influenced by extreme outliers. In addition, the Census Bureau often masks extreme lot sizes and values on the public use SOC dataset making it difficult to calculate averages precisely, but medians (as the midpoint of a frequency distribution) remain unaffected by these procedures.

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