Increase in inventory of new supply batches in the third quarter

Adobe Stock/HBRLV media

Zonda’s New Housing Lot Supply Index (LSI) rose 7.4% year-over-year to 41.7 in the third quarter. Quarter-over-quarter supply increased 9.7% from the second quarter. Despite the increase on a yearly and quarterly basis, the third quarter data reflects a “significantly undersupplied” market nationwide, according to Zonda.

The LSI is an indicator of residential real estate based on the number of vacant single-family developed lots and the absorption rate of these lots. An index value of 100 represents a perfect balance, while a value of 125 and above equates to “significantly oversupplied” and a value of 75 or less equates to “significantly undersupplied”.

“One thing that has plagued the housing market over the past two years is that demand was spinning at 100 miles per minute, and every part of the industry was struggling to keep up,” says the chief economist. by Zonda, Ali Wolf. “While the land market remains significantly undersupplied, the rise in the third quarter shows that the drop in demand for housing is finally allowing the industry to catch up a bit.”

Lot supply slackened in the third quarter in most major metro areas, with 19 of the 30 metros analyzed by Zonda increasing year-over-year. While lot inventory in all major markets remains “significantly undersupplied”, lots undergoing capital improvements indicate that vacant developed lots are expected to increase over the next six to 18 months, according to Zonda. .

Western metros, including Boise, Idaho (+97% year-over-year change in LSI), Los Angeles/Orange County (+74%) and Salt Lake City (+50%) saw the largest easing of land supply on an annual basis. Miami (18.3 LSI reading), San Diego (19.7) and Jacksonville, Florida (22.6) currently have the tightest lot supply among the top 30 metropolitan markets analyzed.

Quarter over quarter, LSI increased in 24 of the 30 selected markets, up from 10 in the previous quarter. Los Angeles and Boise saw the strongest quarter-over-quarter growth, up 46% and 30%, respectively.

Zonda also registers future lots through stages of development, ranging from raw land to streets, the final stage before the lot becomes a vacant developed lot. Zonda groups the latest milestones into a classification called Total Upcoming Batches, which indicates delivery within the next 12 months.

Total upcoming batches for the third quarter were up 23% year-over-year, but down 2% from the second quarter. The biggest year-over-year gains among the total number of upcoming bundles came in the on-site equipment stage, which increased by 30% compared to the third quarter of 2021. The largest share of the total number of upcoming bundles is at the excavation stage (71% nationally) and has a delivery between the second and third quarters of 2023.

“It’s encouraging to see growth in vacant developed lots and total upcoming lots after hitting all-time lows earlier this year,” Wolf said. “The key thing we’re following from here is the trajectory over the next several quarters following the slowdown in the housing market and the resulting reduction in overall housing starts.”