The False Inventory Crisis

Land acquisition directors today review hundreds of sites just to find one they can build on. That’s not pickiness, it’s a crisis most people aren’t talking about. Raw land listings in major Sunbelt markets suggest the supply crunch is easing. Inventory counts are up. Reality is different. There’s a disconnect between land that is listed and land that is buildable.

This disconnect is what I call the “False Inventory” crisis. It’s one of the most significant hidden drags on housing production today, creating a bottleneck that capital alone cannot solve.

False Inventory comprises parcels that appear viable during initial search. They may be zoned for residential use, in growth corridors and priced to sell but once physical and regulatory constraints apply many fall apart. Years ago, a bad site was obvious. It sat in a floodplain, on a steep hillside or far outside the path of development. Today, constraints are more subtle. A parcel might look flat on a satellite map, but closer review reveals slopes that blow up grading costs.

In a recent case in Bend, Ore., an assemblage of three parcels looked like a clean acquisition. Yet deeper analysis revealed an active irrigation canal running beneath the site, invisible on standard plat maps. That single factor deleted 10 lots from the site plan, cutting projected yield by 20 percent.

In my analysis of 251,000 parcels across 20 states, a significant share of land that appears “available” carries fatal constraints invisible during early screening. In some markets, that figure reaches nearly half. These sites linger, inflating supply numbers and consuming acquisition teams’ time.

The real issue isn’t that bad land exists. It’s how long it takes to figure that out. In a traditional land acquisition workflow, identifying deal-breaking issues is a manual and expensive process. An acquisition manager or analyst flags a site, conducts a preliminary feasibility analysis and then waits for a preliminary layout. That feedback loop can take weeks. During that time, teams are stuck. They can’t bid confidently because they don’t know the true yield but they can’t walk away either. This “diligence friction” caps growth. If a team must vet hundreds of sites to find one winner, acquisition volume is limited by analysis throughput, not opportunity. As borrowing conditions ease and demand returns, that friction becomes costly. Builders who can’t quickly filter out False Inventory risk missing narrow market windows. If a homebuilder can analyze a site in minutes versus weeks, they’ll win every time.

For years, the workaround was brute force: more headcount, more manual analysis and more consultants. In an environment defined by layered constraints, throwing bodies at the problem creates a latency issue. A manual team cannot process the volume required to find diamonds in the rough. To address False Inventory, land teams are shifting toward automated decision engines that don’t just estimate yield, but prove it. This model applies environmental data, topography and zoning logic together to produce verifiable site analysis. 

Instead of a simple “yes” or “no,” teams get a clear view into whether a site pencils and exactly why. Constraints are visible, traceable and understood early. Parcels that were previously a “no” due to complex conditions are now in play, for the right price. Just like parcels with polished marketing indicating promising yields may be a “no” for a builder’s criteria. 

The impact isn’t just risk avoidance; it’s discovery. In New England, a land manager used this approach to identify a prime infill lot her team had missed for a decade. By automating constraint checks, they uncovered a gem others overlooked, sent a letter and closed the deal. Even when you know your market well, manual workflows have blind spots. Systematic analysis doesn’t. When a land manager can see within minutes that a parcel loses meaningful acreage to environmental conditions or slopes, there’s no need to wait weeks for a yield study. The deal can be eliminated immediately, freeing teams to focus on sites that genuinely pencil.

Housing supply is often framed as a macroeconomic problem: rates, labor and materials. Those forces matter but they’re largely outside a builder’s control. What is controllable is operational velocity. The builders who win the next cycle won’t have the most capital; they’ll have the fastest speed for decisions. By compressing the time from parcel identification to go/no-go, land teams create a competitive moat that capital alone cannot buy. Filtering out False Inventory early means teams stop chasing mirages and focus on sites that can deliver homes.

Reducing friction at the land stage won’t solve the housing shortage on its own. But it removes one of the least visible and most solvable constraints in the system.

Oliver Alexander is the founder and CEO of Prophetic, an AI-native decision engine for land acquisition. He can be reached at oliver@propheticsoftware.ai .

This column is featured in the February issue of Builder and Developer, read the print version here.