New Home Lot Inventory Dropped to Cycle Lows, Zonda Reports

“The universal strength in housing has led to a universal lot shortage across the country. The steep drop in the LSI tells us that builders have been buying finished lots quicker than replacements are being brought to the market resulting in an extremely competitive land market.”-Ali Wolf

NEWPORT BEACH, Calif. (PRWEB) August 11, 2021

Today, the experts at Zonda, the housing industry’s foremost advisors, released the New Home Lot Supply Index (LSI) for 2Q2021. The New Home LSI, 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 42.0 for 2Q21, representing a 34.8% decrease from 2Q20.
• On a quarter-over-quarter basis, supply declined by 14.0%.
• Nationally, the second quarter data reflects a significantly undersupplied market.
• The downward trends shows that builders are buying finished lots at a rate quicker than they can be replaced. A downward trend, however, also suggests that more homes will be built in the short run as builders go vertical on the lots.
• There are signs of some supply relief over the next 1-5 quarters with total upcoming lots increasing 10% from last quarter.

“The drop in vacant developed lots is a direct result of builders buying up finished dirt as quickly as they can so they can build more homes,” said Ali Wolf, chief economist at Zonda. “The limited supply of vacant developed lots is encouraging more land development. Total upcoming lots in the 2nd quarter grew 14% year-over-year.”

Lot supply trended below 2Q20 levels in every top market across the country.

“The universal strength in housing has led to a universal lot shortage across the country,” said Wolf. “The steep drop in the LSI tells us that builders have been buying finished lots quicker than replacements are being brought to the market resulting in an extremely competitive land market.”

• Lot inventory in all the top markets remain “significantly undersupplied” but lots going through development suggest vacant developed lots should rise over the next 12 months.
• The markets where land supply tightened the most on a year-over-year basis in 2Q21 were Los Angeles, Riverside/San Bernardino and Philadelphia. Builders in these markets have been looking further out in the metro to meet demand and, as a result, areas that formerly were flush with more affordable supply are now extremely competitive for developed lots.
• Los Angeles, San Diego and Baltimore are the tightest for lot supply among major markets.

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.

About Zonda

Zonda represents the housing industry’s leading provider of rich data and the industry’s top advisors for residential real estate development and new home construction. With products and services geared for homebuilders, multifamily developers, lenders, and financial institutions, we provide innovative solutions to maximize opportunities in today’s real estate development landscape. To learn more, visit zondahome.com.

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