Zonda: Supply of New Home Lots Tightens

(Illustration courtesy of Zonda)

The limited availability of desirable land near major job centers is pushing new housing developments further into the suburbs, according to a new report from Zonda, Newport Beach, Calif.  

The Zonda New Home Lot Supply Index showed lot supply tightened year-over-year across the United States as well as quarter-over-quarter. The index is a residential real estate indicator based on the number of single-family vacant developed lots and the rate at which those lots are absorbed via housing starts.

The index came in at 57.4 for the first quarter, representing a 1.5% decrease from a year before. The first-quarter data show a “significantly undersupplied” market nationally, the report said. Nationally, the market has been “significantly undersupplied” since 2017.

On a quarter-over-quarter basis, supply decreased by 7.3% from late 2023.

The index considers the total vacant developed lot supply and adjusts it for overall housing starts activity. The LSI started to roll over in late 2023 as builders felt more confident increasing starts again; that trend continued into the new year.

Ali Wolf, chief economist at Zonda, noted outlying areas often lack the necessary infrastructure, creating a bottleneck for builders eager to expand their communities. “This imbalance between available lots and the desire to start new construction persists, posing a challenge for the housing market,” she said.

Lot supply tightened in most major metropolitan areas in the first quarter, with 19 of the 30 metros examined decreasing year-over-year, up from 11 last quarter, Zonda reported. Lot inventory was still categorized as “significantly undersupplied” in most markets in early 2024. “The tightening trend year-over-year reflects the increase in construction activity over the last few quarters,” the report said.

The markets where land supply loosened the most on a year-over-year basis included Indianapolis, San Diego and Charlotte. In these markets, starts were up 37%, 26%, and 18%, respectively, compared to the same quarter last year, the report said.