|The Atlanta region has more finished lots than anywhere else in the U.S.

Currently there are about 136,000 finished lots spread out across the Atlanta MSA and at today’s absorption pace, it will take about 18 years before these lots are used up.

So why are builders having such a difficult time finding lots to purchase? Because over half of these finished lots are not located in highly desirable locations and it will take much higher home prices in the highly desirable locations before buyers will adjust their demand preference and begin buying in Class B and C locations.

When will that happen? Sooner than you may think, in fact, we estimate less than 5% of today’s remaining finished lots are located in Class A locations and most of these lots have already been claimed by existing builders or are held by investors. A few lots still remain in the hands of banks or federal agencies and are winding their way through the various legal channels and bureaucracies of those entities. Once these remaining lots become available, we expect multiple offers will be made on them by builders of all sizes driving up prices. The homes that are built on these lots will be priced higher than the ones built just one year earlier. Home prices will increase lot prices escalate due to the resulting undersupply of both new houses and finished lots in these high demand areas.

When you calculate lot supply in the high demand areas it falls to about a 2 to 4 year supply. That snapshot even understates the rapid speed in which the market is adjusting back to it’s historical norm of 18 to 24 months of supply. Before it’s over we expect to see a severe shortage of lots of the Class A variety.

A housing recovery is taking place and a macro analysis of the housing market can be very misleading. Do your own homework and dig deep to uncover the truth.