UPDATE: A significant decline in demand for residential land has emerged, prompting urgent concerns about the U.S. housing market. According to a new report from John Burns Research & Consulting (JBREC), demand for residential land has plunged by nearly two-thirds, with only 28 percent of land brokers reporting strong demand in the second quarter of 2025, down from 76 percent a year earlier.
This drastic drop suggests that new home construction is likely to decelerate in the coming months as developers reassess profitability amid challenging market conditions. For homebuyers eager to benefit from increasing inventory, this trend could signal troubling news for the long-term housing landscape.
Why is demand for residential land plummeting? Dillan Krieg, senior research analyst at JBREC, revealed to Newsweek that builders are retreating from the land market. “The new home market has been sluggish this year, with falling sales and high inventory pushing prices down,” Krieg stated. Builders, who control substantial land reserves, are slowing down new home starts and land purchases, evaluating whether their existing land aligns with profitability goals.
Currently, there are over 2 million homes for sale in the U.S., with nearly 600,000 new listings, according to Redfin. Increased inventory is driven by more sellers entering the market and potential buyers being sidelined by elevated prices and mortgage rates. In August, 479,027 homes were sold, reflecting a 1.4 percent year-over-year decline.
The National Association of Home Builders (NAHB) reports that 37 percent of builders have reduced prices by an average of 5 percent as of August, while 66 percent are offering incentives to sell newly constructed homes—the highest percentage since the pandemic began.
Under these conditions, JBREC experts predict that demand for residential land will remain low in the upcoming quarters. “Builders already have ample land and a large backlog of homes to sell, so purchasing will likely remain slow until inventory clears,” Krieg explained. “Finished lots are undersupplied, but builders are not pushing for immediate home deliveries, cooling demand for these lots.”
Rebounding demand may only occur if the new home market recovers or if land prices drop sufficiently to encourage new purchases.
What does this mean for the U.S. housing market? Krieg warns that the decline in land sales signals a slowdown for the overall housing market. “The land market typically lags the broader housing market, especially on pricing,” he noted. “We are observing early signs of price softening in challenged markets, which could create opportunities for buyers.”
In the short term, lower land prices might enable builders to offer homes at reduced costs, potentially aiding affordability for American homebuyers. However, Krieg cautions that this alone won’t resolve the broader affordability crisis as significant barriers remain to developing reasonably priced homes.
Moreover, the drop in land demand and prices confirms builders are cutting back on new starts, further constraining near-term supply and impacting building product companies’ volumes.
As the U.S. housing market navigates these tumultuous waters, the implications for homebuyers, builders, and the broader economy are profound. Watch for updates as this developing situation unfolds.
