Exploring the Current Health of Land and Lot Supply in the U.S. Market

Current Trends in U.S. Land and Lot Supply

The recent report from Zonda indicates that the health of land and lot supply in the United States is at its most robust level in years. The New Home Lot Supply Index (LSI), which focuses on single-family vacant developed lots, is an essential metric reflecting the relationship between lot supply and housing starts. For the fourth quarter of 2024, the LSI recorded a score of 60.8, which, while showing a slight 1.7% decrease from the same quarter last year, marks a significant turnaround from previous trends.

Ali Wolf, Chief Economist at Zonda, notes that builders had previously voiced concerns regarding a shortage of buildable lots amid rapidly increasing demand. However, the market saw a substantial rise in lot supply beginning in late 2022 and through early 2023, coinciding with a cooling in consumer demand and ongoing lot development activities. This has led to a more balanced market characterized by steady growth in both the availability of land and the number of new housing starts, suggesting a positive trend for prospective homebuyers and builders alike.

Diving deeper into the figures, the report highlights a 5.4% increase in lot supply from the third quarter of 2024. Yet, despite this quarterly growth, a year-over-year analysis reveals a tightening of supply in most major metropolitan areas. In fact, out of 30 surveyed markets, 17 showed a decrease in available lots, a decrease from 22 markets noted in the previous quarter.

Some areas have benefitted from this release of pent-up land supply, with Orlando, San Francisco, and Nashville showing the most improvement. Orlando, for instance, experienced a 7% increase in housing starts, while San Francisco saw a 5% rise, demonstrating that these markets are adjusting adaptively to the changing circumstances. On the flip side, Nashville's starts dipped by 2%, indicating a more cautious approach in that market.

Interestingly, there are three regions characterized as appropriately supplied: Austin, Atlanta, and Dallas. These areas have not only seen stable increases in housing starts but also in vacant developed lots, marking a healthy balance between supply and demand. However, San Antonio remains slightly undersupplied, complicating the landscape there.

Encouragingly, the total number of upcoming lots, or those expected to be delivered over the next year and a half, has surged by 13.2% year-over-year, despite a 6.7% decline from the previous quarter. The data indicates that the supply is, at least on a comparative basis, stronger than it has been over the past few years. In fact, these upcoming lots are estimated to be 5.7% higher than in 2023 and 14.4% more compared to late 2019 figures, further contributing to expectations of better conditions ahead.

According to Wolf, “The total upcoming lots provide valuable insights into the trajectory of the land and lot markets over the next year, and the outlook is positive.” The critical factor now will be how housing starts respond in light of the current economic environment marked by persistently high interest rates. For 2025, there's an optimistic forecast for modest growth in single-family starts, contingent on consumer adaptability to these financial conditions.

In summary, as we navigate the evolving landscape of the U.S. real estate market, it’s crucial to keep an eye on the patterns of lot supply and housing starts. 2025 is poised to bring new opportunities, and under the watchful guidance of leaders in the industry, like Zonda, stakeholders can more successfully capitalize on emerging trends. For anyone interested in digging deeper into such market dynamics, the full report from NewHomeSource powered by Zonda provides thorough analyses and projections. Stay tuned for updates as this significant area of the economy continues to progress.