February 29, 2024

Pressure on lot supply eased last year: Zonda


Thanks to a slower rate of housing starts, there were more lots available in the fourth quarter of 2023 compared to a year earlier, according to Zonda’s New Home Lot Supply Index. 

Lot inventory tightened on a quarterly basis, however, a signal of rising builder activity. Year over year, the index rose by 25.1% to reach a reading of 61.9, but Zonda noted that the national market remains “significantly undersupplied.” On a quarterly basis, supply fell by 3.2%. 

“The market saw a brief reprieve in lot availability as starts slowed, but the fourth quarter data captures the return of tightening as builders step up construction activity,” Zonda chief economist Ali Wolf said in a statement.

“75% of builders intend to start more homes in 2024 compared to 2023, and those starts require lots. The lingering issue is how today’s lot pricing plays into housing affordability going forward.”

A majority of metropolitan areas have more lots available than last year. In total, 24 of the 30 metros studied showed a loosening in their lot supply, although that’s down from 29 in the third quarter.

Phoenix, Nashville, and Charlotte added the most lots year over year. Simultaneously, these markets posted annualized increases in housing starts of 47%, 13%, and 4%, respectively.

On the other hand, Orange County, California,  posted the tightest lot supply in the country, with its index reading of 16.9 dropping by 55% year over year. 

Miami and San Diego also posted tight inventories of land, a display of geographic and topographic limitations on land and lot development.

Upcoming lots

Zonda also analyzes “upcoming lots,” which encompass future lots through their various stages of development, ranging from raw land to developed land. Upcoming lots are typically delivered over the following  12 to 18 months. The total number of upcoming lots for the fourth quarter of 2023 decreased 20% year over year and was down 2% from the third quarter. 

“Context is important when looking at total upcoming lots,” Wolf said. “While there is a notable pullback in the most recent data, total upcoming lots are 11% above the same time in 2019. For context, new home sales finished the year exactly in line with 2019 levels. Current lot development is supportive of modest growth in the new home market but doesn’t support blockbuster growth.”

The New Home Lot Supply Index is a residential real estate indicator based on the number of vacant single-family developed lots and the rate at which those lots are absorbed via housing starts.



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