New Home LSI: New home lot supply drops to cycle lows

The New Home Lot Supply Index (LSI) came in at 63.5 for 3Q2020, representing an 8.9% drop from 3Q19. On a quarter-over-quarter basis, supply declined by 3.7%.

New Home Lot Supply Index for select markets

Lot inventory reached new lows in nearly every top market across the country.

• The markets that tightened the most on a year-over-year basis in 3Q20 were Nashville, San Diego, and Portland. San Diego and Nashville make up two of the three tightest markets in our index, while Portland falls more in the middle.
• San Francisco and Los Angeles, two traditionally undersupplied markets, posted substantial increases in their lot supply year-over-year. This is due to both a slowdown in starts due to the pandemic, as well as an increase in vacant developed lots in more affordable areas.
• Atlanta remains the market with the most relative supply in the country due to local market dynamics and where the lots are available, but lots are still down double-digits year-over-year.

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.

The data provided in this release are for use only by the primary recipient or the primary recipient’s publication or broadcast. This data may not be modified, resold, republished or licensed to any other source, including publications and sources owned by the primary recipient’s parent company without prior written permission from Zonda.