Big Squeeze on Buildable Lots for New Homes

Buildable lots have been in short supply this year, but data from one real estate company expects that to improve next year. Zonda's New Home Lot Supply Index shows the year-over-year supply has decreased across the U.S. As of Q2, it was down 9.3%, but it doesn't take into account lots under development, which are up substantially compared to last year. Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review. Zonda's chief economist, Ali Wolf, says: "While vacant developed lot inventory tightened slightly in the second quarter, the key number to track going forward is lots under development, which are up 28% compared to last year." (1) 10% Year-Over-Year Decline The New Home Lot Supply Index came in at 38 for the second quarter, which represents a 2.2% decline from the first quarter and a 9.3% decline from the second quarter of last year. Zonda says that "nationally, the 2022 data reflects a significantly undersupplied market" and that most major metropolitan areas are experiencing this tight supply. The report says that almost all the top major markets are "significantly undersupplied." The three areas where lot supply has declined the most on a year-over-year basis are in Jacksonville, Florida; Miami, and Denver. Jacksonville and Miami are also among the three with the tightest lot supply right now. San Diego is the third metro with the lowest inventory. Areas where the lot supply grew the most from Q1 to Q2 include Los Angeles and Orange County at 17%. Boise, Idaho, was also up 15%. Expected Rise in Lot Supply Next Year Finding buildable lots should be easier in 2023 because of the big increase in lot development. Zonda says that 71% of the upcoming lots are in the excavation stage and should be available for development in the first half of next year. Over the last few years, homebuilding activity has been impacted by labor and materials shortages, along with a tight inventory of buildable lots. Now that more lots are in the pipeline, it appears that home buyer demand could impact the pace of residential construction. According to Wolf: "The housing market was moving a mile a minute heading into 2022." She says: "What we've seen is that consumers have responded to higher home prices and mortgage rates by slowing demand. Housing starts are tied to housing demand, and 87% of the builders surveyed by Zonda anticipate slowing new construction in response to the shifting market. You'll find a link to Zonda's report on lot inventory in the show notes at newsforinvestors.com. Please remember to hit the subscribe button, and leave a review! Thanks for listening. I'm Kathy Fettke. Links: 1 -https://www.prweb.com/releases/new_home_lot_inventory_remains_tight_in_2q22_zonda_reports/prweb18839151.htm