The shift in home buyer behavior during the COVID-19 pandemic caught everyone by surprise, with demand surging far faster than the industry could keep up. Shortages have been the story over the past year with bottlenecks throughout the supply chain. Lot supply fell to a record low of 15.6 months for the Dallas-Fort Worth region by the end of March. The top submarkets of North Fort Worth, Denton County, Kaufman County, and Frisco among others have even tighter lot supplies ranging from eight to 13 months. With the lot supply falling, actively selling home builder projects dropped 26% in the past year. Builders have taken to a strategy of capping sales in an attempt to align production capacity and lot supply with the demand. As a result, 2021 has become “the year of the lot gap out.” Is any relief on the way?
Zonda has tracked the new residential development pipeline and lot supply in the Dallas-Fort Worth metroplex since the 1980s. At the end of March, there were 59,000 vacant developed lots in the market. There are an additional 50,000 future lots under construction that should be delivered over the next 12 months, the most in over a decade. However, with starts anticipated to push past 50,000 homes in the next 12 months the lot pipeline is barely enough to keep up.
The surge in demand and record low lot supply have sent home builders and developers on a buying spree, creating a land seller’s dream. Land and lot prices are hitting record highs and pushing buyers further out in pursuit of affordability. There is hardly a day that goes by without an announcement of a new upcoming residential development. Zonda added more future lots to its database during the past 90 days than all of 2020. Included in these futures are 12 new master-planned communities with at least 1,000 lots planned. Relief is on the way, but how soon?
It will take a year or two before these lots start to deliver to the market. At best, the surge in new lot deliveries will begin in the second half of 2022 through 2023. Until then, it will be difficult for the lot supply to grow significantly, and it will likely remain a sellers’ market.
Submarkets benefiting the most from the 2021 land rush and positioned to grow significantly are numerous: Anna, Burleson, Celina, Collin County, Crowley, Kaufman County, Mesquite, Northwest Tarrant County, Princeton, and Southwest Tarrant County among others. The list is long. The common theme among these locations is the ability to provide affordable homes at or below the median price of the broader competitive geography.
Relief is on the way. Stay tuned to see if the market for lots finally shifts from a sellers’ market to more of a buyers’ market by 2023.
