Zonda’s New Home Lot Supply Index (LSI) for the first quarter revealed tightening of supply across the nation for both quarterly and annually. An increase from 22 markets in the fourth quarter of 2023, the LSI tightened quarter over quarter in 25 of Zonda’s select markets.
The New Home LSI, a barometer for residential real estate dynamics, came in at 57.4 for the first quarter, marking a 1.5% decrease from the same quarter in 2023. On a quarter-over-quarter basis, supply decreased by 7.3% from the prior quarter. The new data shows a “significantly undersupplied” market nationally, which Zonda notes has been “significantly undersupplied” since 2017.
“Limited availability of desirable land near major job centers is pushing new housing developments further into the suburbs,” says Ali Wolf, chief economist at Zonda. “However, these 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.”
Reflecting the increase in construction activity over the last few quarters, lot supply has tightened in most major metros. Up from 11 metros in the fourth quarter of 2023, 19 of 30 metros experienced tightening year over year during the first quarter.
Compared with the same time last year, Los Angeles-Orange County tightened the most, falling 52% to 15.6, making it the tightest housing market across the country. Miami and San Diego are also among the three tightest markets due to geographic and topographical limitations.
Conversely, the markets where land supply loosened the most on a year-over-year basis were led by Indianapolis; San Diego; and Charlotte, North Carolina. In these markets, starts were up 37%, 26%, and 18%, respectively, compared with the same quarter last year, Zonda notes.
Zonda, which also records future lots through the stages of development, groups the last few stages into a classification called total upcoming lots, typically indicating delivery over the next 12 to 18 months. The total upcoming lots increased 0.4% year over year and 16.1% from the prior quarter.
The increase reflects the continued market advantage builders have given the resale backdrop, Zonda says. With existing-home inventory significantly lower than pre-pandemic levels—down nearly 40%—builders are actively seeking land to meet potential demand.
“The first quarter saw a higher-than-expected number of total upcoming lots, aligning with the generally optimistic outlook within the home building industry,” Wolf says. “This increase in upcoming lots is crucial for construction activity, and it bodes well for growth in housing starts throughout the rest of the year assuming consumer demand holds up.”
The largest increases among the total upcoming lots came in the roadwork stage, which rose 36% from the same period last year. Making up 57% nationally, the largest share of total upcoming lots was in the excavation stage in the first quarter.
