Thanks to a slower pace of home construction, more lots were available in the fourth quarter of 2023 compared to the previous year, according to ZondaSupply index of new housing lots.
However, lot inventory declined quarter-on-quarter, a sign of growing builder activity. Year over year, the index rose 25.1% to a reading of 61.9, but Zonda noted that the domestic market remains “significantly undersupplied.” In quarterly terms, supply fell 3.2%.
“The market saw a brief respite in lot availability as starts slowed, but fourth-quarter data captures the return of tightening as builders ramp up construction activity,” said Zonda Chief Economist, Ali Wolf, in a statement.
“75% of builders intend to start more homes in 2024 compared to 2023, and these starts require lots. The remaining issue is how current lot prices influence future housing affordability.”
Most metropolitan areas have more lots available than last year. In total, 24 of the 30 metros studied showed a decrease in their lot supply, although that is down from 29 in the third quarter.
Phoenix, Nashville and Charlotte added the most lots year over year. At the same time, these markets recorded annualized increases in home construction of 47%, 13% and 4%, respectively.
On the other hand, Orange County, California, had the tightest lot supply in the country, with an index reading of 16.9 that fell 55% year over year.
Miami and San Diego also recorded tight land inventories, a sign of geographic and topographic limitations on land and lot development.
Zonda also discusses “next lots,” which encompasses future lots through their various stages of development, ranging from raw land to developed land. The next batches are usually delivered in the next 12 to 18 months. The total number of upcoming lots for Q4 2023 was down 20% year over year and down 2% from Q3.
“Context is important when looking at total upcoming lots,” Wolf said. “While there is a notable pullback in the most recent data, total future lots are 11% above the same period in 2019. For context, new home sales ended the year exactly in line with 2019 levels. “Current lot development supports modest growth in the new home market, but does not support blockbuster growth.”
The New Home Lot Supply Index is a residential real estate indicator based on the number of vacant single-family developed lots and the rate at which those lots are absorbed by housing construction.