New Home Lot Inventory Continues to Decline to Cycle Lows, Zonda Reports

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Builders increased absorption pace further reducing lot supply

Zonda's New Home Lot Supply Index reports a new low for 3Q2021.

“Upcoming lots hold the key to improving the housing supply and demand imbalance. Runaway home price growth has been driven by low interest rates and a dearth of inventory. Total upcoming lots are up 14% compared to last year...” —Ali Wolf, Chief Economist

Today, the experts at Zonda, the housing industry’s foremost advisors, released the New Home Lot Supply Index (LSI) for 3Q2021. 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 38.8 for 3Q21, representing a 36.8% decrease from 2Q20.
  • On a quarter-over-quarter basis, supply declined by 7.8%, a smaller drop than last quarter.
  • Nationally, the third quarter data reflects a significantly undersupplied market.
  • The downward trends show 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 14% from the same time last year.

“More homebuilding is coming but patience is required,” said Ali Wolf, chief economist at Zonda. “Governmental delays and labor shortages are not new problems for the homebuilding industry, but these legacy challenges have only gotten worse over the past 20 months. Those plus supply chain disruptions are wreaking havoc on development timelines.”

Lot supply trended below 3Q20 levels in every top market across the country.

  • 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 3Q21 were Los Angeles/OC, Tampa and Riverside/San Bernardino. 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/OC, San Diego and Charlotte currently have the tightest lot supply among major markets.
  • The LSI grew quarter-over-quarter in eight of Zonda’s select 30 markets. On a quarter-over-quarter basis, Salt Lake City and Baltimore grew the most, up 18% and 14%, respectively.

“Upcoming lots hold the key to improving the housing supply and demand imbalance,” said Wolf. “Runaway home price growth has been driven by low interest rates and a dearth of inventory. Total upcoming lots are up 14% compared to last year, and as those lots turn into homes for sale, the level of home price growth is expected to slow. This is an important factor to keep the housing market chugging along.”

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

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Valerie Sheets
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