Lot supply reached its highest level in five years during the second quarter, according to Zonda’s New Home Lot Supply Index (LSI).
The LSI, which tracks the number of single-family vacant developed lots and the pace at which builders start homes on them, rose to 68.4 – a 20.6% increase from a year ago and the fourth consecutive quarterly gain. Even with the increase, the national market remains “significantly undersupplied,” a designation it has held since 2017.
Why It Matters: Builders scaled back on starts this year just as more lots became available, a shift that could influence land acquisition strategies in the months ahead.
“The timing of land and lot deliveries is a growing challenge in today’s housing market,” said Ali Wolf, chief economist for Zonda. “While builders had planned to increase housing starts in 2025, they slowed production as the year progressed due to choppy consumer demand and rising resale supply. This slower pace of construction contributed to the 5-year high in Zonda’s LSI, as fewer lots were converted into starts.”
By the Numbers:
- 22 of 30 major markets recorded year-over-year gains in lot supply, led by San Francisco, Los Angeles/Orange County, and Tampa.
- San Diego remains the nation’s most constrained lot market with an index of 12.6, followed by Miami (16.1) and Baltimore (20.7).
- Austin, Atlanta, and Dallas are now considered “appropriately supplied.”
The Land Pipeline
The development pipeline for future lots is also growing. According to the LSI, the number of lots in various stages of development increased 7.6% compared to a year ago. Nearly 400,000 of these are currently in the excavation stage and are expected to be ready for building in the first half of 2026.
Looking ahead, Wolf said the market is ready to support more construction when builder confidence returns.
“We don’t have a glut of supply,” she said, “but conditions are in place for the market to absorb additional homes.”
