Zonda’s New Home Lot Supply Index (LSI) fell 20.4% on a year-over-year (YOY) basis to a reading of 38.6 in the first quarter of 2022. The index was essentially flat compared with the fourth quarter of 2021, down 0.2%.
The index, a residential real estate indicator based on the number of single-family vacant developed lots and the rate those lots are absorbed, indicates lot supply tightened YOY across the U.S. A value of 100 reflects “perfect equilibrium,” while a reading of 75 and below reflects a “significantly undersupplied” market.
“Lot inventory flattened quarter over quarter, which represents a notable change from the consistent decline since the start of the pandemic,” says Zonda chief economist Ali Wolf. “Home building starts with lots, and the flattening trend captures the time and money invested in land development since the start of the pandemic.”
According to Zonda, lot supply trended below first quarter 2021 levels in almost every top market across the country. The LSI reading in Austin, Texas, was flat on a YOY basis, while the index reading in Salt Lake City increased 1% YOY. Lot inventory in all top markets analyzed remains “significantly undersupplied,” but lots going through capital improvements suggest vacant developed lots should increase over the next six to 18 months, according to Zonda.
Florida is home to the three markets where land supply tightened the most on a YOY basis: Jacksonville (-46%), Tampa (-41%), and Miami (-40%). Zonda says builders in the three Florida markets, similar to most areas in the country, have been burning through available lots in attempts to meet demand. Jacksonville, Miami, and Los Angeles/Orange County have the tightest lot supply among major markets analyzed, according to Zonda.
On a quarter-over-quarter basis, the LSI increased in 12 of Zonda’s 30 select markets. Austin and Indianapolis recorded the largest quarterly growth, up 18% and 17%, respectively.
Zonda tracks future lots through stages of development, ranging from raw land through “streets in,” which is the last phase before a lot becomes a vacant developed lot. Total upcoming lots, which implies delivery within the next 12 months, increased 39% YOY in the first quarter and 11% from the fourth quarter of 2021. According to Zonda, the current majority of total upcoming lots fall in the excavation stage, with an expected delivery between fourth quarter 2022 and first quarter 2023.
“Home builders 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 a 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.”
