If you are looking to buy a newly built home, especially in metropolitan urban areas, don't wait for the spring rush. You could be priced out of the market.

Builders are passing onto consumers more and more of the higher costs of land to build new homes. In Indianapolis, for example, where postage stamp-sized, single-family home lots of 5,000 square feet fetch up to $26,000, the inventory of lots for single family homes is only 20 months long.

Move-up home development lots in North Carolina's Raleigh-Durham metropolis are priced at up to $35,000 for only 9,000 to 12,000 square feet of dirt.

In north and central New Jersey, where quarter-acre lots start at $65,000, some jurisdictions have found the market so fiscally stormy for developers they are offering developers free land as a financial incentive to build more low-and moderate-income housing. Out West, La Nina has nothing on California's blustery new home climate.

In Sacramento, California's state capital, lot prices appreciated by as much as 15 percent in 1998. Finished lots of any size for less than $200,000 barely exist in Orange County, where a storm of housing demand inflated land prices by 20 percent last year.

And thanks to the demand driven by the San Francisco Bay Area's silicon lined economy, prices of $1 million an acre aren't unusual. North, south, east and west.

So much demand.

So little land.

America's booming economy has a down side.

Entry-level home buyers are taking it on the chin especially in urban areas where the demand to live near employment centers is over-burdening infrastructures and adding tens of thousands of dollars to the cost of home sites, according to Hanley-Wood's January 1999 U.S. Housing Markets.

The desire of young upwardly mobile professionals with growing incomes to live in reborn urban centers rather than commute from the suburbs and communities moving to save suburban greenbelts from further sprawl is a one-two combination that's putting some home buyers on the ropes.

"New home buyers are being forced to make a choice. Pay less and commute longer distances or pay more and improve your quality of life," said Eric Morley, principal with the Morley Hunter Group in San Jose where median home prices broke the $300,000 barrier early in 1998.

"I think it's largely economy driven," Morely added.

A whopping 378,000 new jobs nationwide in December alone, combined with leaps in the symbiotic consumer confidence index, to send Americans in droves looking for new and resale homes.

Last year, to meet the demand, builders broke ground for more than 1.6 million new residences, 10 percent ahead of 1997, according to the U.S. Census Department. That made 1998 the strongest year for home building since 1987. December's seasonally-adjusted annual rate of 1.72 million, heralds yet more to come.

Experts say 1999's economy could slow a bit, but as the nation continues one of the longest periods of economic growth this century, first-time home buyers will need all the cash they can get.

"There is a desire to be closer to a village environment in midtowns or closer to downtowns, which I didn't see six or seven years ago when there was less of a push for infill. Now local governments are saying we want to promote higher density and in-fill housing. Now, because in-fill properties are common and the land so scarce there's a premium on infill housing," Morely said.

Published: January 29, 1999

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