“The race to acquire lots is on as builders continue working to quickly get more homes on the ground. Competition for lots is fierce, but demand is showing no signs of letting up, which is encouraging more building.”
NEWPORT BEACH, Calif. (PRWEB) May 12, 2021
Today, the experts at Zonda, the housing industry’s foremost advisors, released the New Home Lot Supply Index (LSI) for 1Q2021. 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 49.0 for 1Q21, representing a 24.2% decrease from 1Q20.
- On a quarter-over-quarter basis, supply declined by 10.1%.
- The national first quarter data represents a significantly undersupplied market.
- The downward trend captures that builders are buying finished lots as quickly as they are available, but overall supply is tight.
“The race to acquire lots is on as builders continue working to quickly get more homes on the ground,” said Ali Wolf, chief economist at Zonda. “Competition for lots is fierce, but demand is showing no signs of letting up, which is encouraging more building.”
Lot supply trended below 1Q20 levels in nearly every top market across the country.
- Lot inventory in all the top markets remain “significantly undersupplied.”
- The markets that tightened the most on a year-over-year basis in 1Q21 were Los Angeles, San Francisco and Baltimore. With the increased interest in for- sale product, particularly in a suburban setting, builders in these markets have been quickly securing as many lots as they can. Topography issues and NIBYMs puts a cap on lot development, though.
- Los Angeles, San Diego and Baltimore are the tightest for lot supply among major markets.
“The silver lining in today’s extreme lot shortage is that it should be short lived,” says Wolf. “Builders have been aggressively buying land in different stages of development, and many of these lots will turn into homes for sale in the coming year or two.”
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.
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.