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Housing Market

Lot Supply Index 1Q22

May 18, 2022

The New Home Lot Supply Index (LSI) came in at 38.6 for 1Q22, representing a continuation of the flattening seen last quarter.  

New home lot inventory remains flat

The New Home Lot Supply Index, backed by data from Zonda, shows lot supply tightened year-over-year across the United States. The index is a residential real estate indicator based on the number of single-family vacant developed lots and the rate those lots are absorbed.

  • The New Home LSI came in at 38.6 for 1Q22, representing a 20.4% decrease from 1Q21.
  • On a quarter-over-quarter basis, supply decreased by 0.2%, essentially flat from 4Q21.
  • Nationally, the 1Q22 data reflects a significantly undersupplied market.

“Lot inventory flattened quarter-over-quarter, which represents a notable change from the consistent decline over the past couple of years,” said Ali Wolf, chief economist at Zonda. “Homebuilding starts with lots and the flattening trend captures the time and money invested in land development since the start of the pandemic.”

Lot supply trended below 1Q21 levels in almost every top market across the country

  • Lot inventory in all the top markets remains “significantly undersupplied” but lots going through capital improvements suggest vacant developed lots should rise over the next 6-18 months.
  • The top three markets where land supply tightened the most on a year-over-year basis were all in Florida. The year-over-year declines were led by Jacksonville, Tampa, and Miami. Similar to most areas in the country, builders in these markets have been burning through their available lots in attempts to meet demand.
  • Los Angeles/OC, Miami, and Jacksonville currently have the tightest lot supply among major markets.
  • The LSI grew quarter-over-quarter in twelve of Zonda’s select 30 markets, even with last quarter. On a quarter-over-quarter basis, Austin and Indianapolis grew the most, up 18% and 17%, respectively.

Zonda tracks future lots through the stages of development. The stages range from raw land through streets in, which is the last step before the lot becomes a VDL. Zonda groups the last few stages into a classification called total upcoming lots, which implies delivery within the next 12 months.

Total upcoming lots for 1Q22 increased 39% year-over-year and 11% from last quarter alone. The largest annual gains among the total upcoming lots came in the equipment on-site stage, which grew 40% from the same time last year and implies expected delivery in the following quarter. The current majority of total upcoming lots fall in the excavation stage, making up 70% nationally and have an expected delivery between 4Q22 and 1Q23 (the range represents different timeframes from local entitlement processes). Note, not all the lots in excavation will match Zonda’s estimated timeline.

 

“Homebuilders are finding it difficult to quickly get more homes built because of the land, labor, material, and governmental shortages and delays,” says Wolf. “The same challenges apply to land and lot development, which is impacting availability. However, there is light at the end of the tunnel. Our total upcoming lots data tells us more vacant developed lots should become available over the next 12 months.”

Economic forecasts

Tune in on Tuesday, May 31 for the Q2 Housing Forecast webinar. Chief Economist Ali Wolf will deliver a national housing market update and Senior Vice President of Advisory, Kristine Smale will hone in on Florida markets with regional updates for Tampa, Jacksonville, Central Florida/Orlando, and South Florida.

We’ll take a closer look at market opportunities and challenges to address these critical questions:

  • How are consumers holding up in today’s market?
  • Where are the top markets for starts growth?
  • What have higher mortgage rates meant for our forecasts?

Register for the webinar today, and learn more about other upcoming Zonda events and webinars.

Methodology

The Zonda New Home Lot Supply Index (LSI) is built on proprietary, industry-leading data that covers the production new home market across the United States. The index values represent single-family vacant developed lot supply, lots that are ready to be built on, relative to equilibrium. Released quarterly, the New Home LSI provides an unrivaled look into the lot markets across the country, offering a current quarter snapshot as well as insight into the directional trend.

The New Home LSI is calculated based on each markets’ specific equilibrium as determined by our team of local experts and historical activity. The comparative current value is adjusted to capture the “true” months of supply figure by applying a greater weight to vacant developed lots in subdivisions with more starts activity. Each index value is associated with a phrase highlighting the current lot supply dynamics. A value of 100, represents perfect equilibrium, while a value of 125 and above equals “Significantly Oversupplied”, 115-125 – “Slightly Oversupplied”, 85-115 – “Appropriately Supply”, 75-85 – “Slightly Undersupplied”, and 75 and below – “Significantly Undersupplied.”

The foundation of the index is a quarterly release conducted by Zonda. It is necessary to monitor residential lot supply to understand how new home markets may be impacted by the incoming pipeline.

Ali Wolf

Chief Economist

Ali Wolf

Chief Economist

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