Zonda’s New Home Lot Supply Index Shows Tight Supply Nationwide


At IBS 2018, attorney Richard Guerard shared ways small builders can get creative in finding and purchasing land.
Chad McDermott
Adobe Stock

Zonda’s New Home Lot Supply Index fell to 63.5 for the third quarter of 2020, down 9% from the third quarter of 2019 and 3.7% on a quarter-to-quarter basis.

The index, derived from Zonda’s home industry data, indicates the number of single-family vacant developed lots available and the rate they are absorbed. A new-home LSI value of 100 represents “perfect equilibrium” in a market. Values of 115 and above equal slightly or significantly oversupplied markets, while values of 85 or below equal slightly or significantly undersupplied markets.

Overall, Q32020’s numbers represent a “critically undersupplied market” nationwide and highlight a lack of near-term lot supply at the national level. “Lot inventory reached new lows in the third quarter and unequivocally represents a land sellers’ market,” says Ali Wolf, chief economist at Zonda. “Record low lot supply tells us it won’t be easy to backfill the land pipeline after the exceptional year for new-home sales in 2020.”

Of the top new-home construction markets, Zonda only lists one—Atlanta—as “slightly undersupplied,” with a New Home LSI index value of 82.5, down 14% from one year earlier. The rest of the markets are “significantly undersupplied.”

Lot supplies in Nashville, Tennessee; San Diego; and Portland, Oregon, tightened the most on a year-over-year basis, with 30%, 28%, and 24% index reading drops, respectively. At the same time, San Francisco and Los Angeles—two traditionally undersupplied markets, according to Zonda—posted substantial year-over-year increases in lot supply. Zonda attributes this growth to a slowdown in starts and a rise in vacant developed lots in more affordable areas.

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