Compared to third quarter of 2024, supply increased by 5.4% in the fourth quarter of last year. The loosened New Home Lot Supply Index (LSI)—although tightened year-over-year—is welcomed change as growth of lots and starts keep steady.
"Land and lot supply is at the healthiest levels we've seen in years," says Ali Wolf, chief economist with Zonda. "Between 2021 and 2022, builders expressed concerns about a potential shortage of buildable lots due to rapid demand growth. However, lot supply surged in late 2022 and early 2023 as consumer demand softened while lot development continued. Currently, the market is characterized by steady growth in both lot supply and new housing starts."
According to Zonda, the LSI came in at 60.8 for fourth quarter of 2024, a 1.7% decrease from fourth quarter of 2023. The latest data shows a "significantly undersupplied" market nationally, which has been the case since 2017. However, on a quarter-over-quarter basis, supply increased by 5.4% from third quarter of 2024.
In most major metros, lot supply tightened year-over-year. Of the 30 metros followed, 17 decreased, a healthy drop from the 22 the quarter prior.
The markets where land supply loosened the most on a year-over-year basis were led by Orlando, Florida; San Francisco; and Nashville, Tennessee. In these markets, fourth quarter starts varied compared to this time last year, with Orlando up 7%, San Francisco up 5%, and Nashville down 2%.
Austin, Texas; Atlanta, Georgia; and Dallas, Texas, are considered appropriately supplied, while San Antonio, Texas, is still slightly undersupplied. Fourth quarter housing starts increased year-over-year in three of these markets (Austin was the outlier), and vacant developed lots increased in three as well (sans Atlanta).
For the fourth quarter, total future lots (those with delivery over the next 12 to 18 months) increased 13.2% year-over-year, but were down 6.7% from last quarter. Although the year-over-year growth was remarkable, Zonda notes that fourth quarter 2023 was a recent trough in their data. Total upcoming lots were 5.7% higher in 2024 compared to 2023 and 14.4% more in fourth quarter 2024 compared to fourth quarter 2019.
"Total upcoming lots provide valuable insights into the trajectory of the land and lot markets over the next year, and the outlook is positive," says Wolf. "Now, all eyes are on housing starts. Assuming consumers can navigate the current environment of persistently high interest rates, we anticipate modest growth in single-family starts during 2025."
