Lot supply loosened on both a year-over-year and quarter-over-quarter basis in the fourth quarter of 2025, driven in part by annual starts ticking down.
Zonda’s New Home Lot Supply Index (LSI) registered a reading of 81.6 in the fourth quarter, representing a 34.2% increase from the same period in 2024. Additionally, for the first time since 2017, lot supply crossed into the “slightly undersupplied” category from the “significantly undersupplied” category.
“Policy uncertainty, the current cost of living, student loans, labor market concerns, interest rates, home prices, changes to immigration, geopolitics, and more have all slowed consumer demand,” said Zonda and NewHomeSource chief economist Ali Wolf. “When consumers aren’t happy, builders aren’t happy, and that’s what we are seeing in the data. Builders have scaled back starts in response to slower sales, which by extension has allowed for lot supply to grow.”
The LSI is a residential real estate indicator based on the number of single-family vacant developed lots (VDL) and the rate at which those lots are absorbed via housing starts.
While lot supply loosened on a national level, 16 of the 30 markets analyzed by Zonda remained “significantly undersupplied” in the fourth quarter. Lot supply tightened the most in Minneapolis, Miami, and San Diego. Conversely, lot supply loosened the most on an annual basis in Los Angeles/Orange County, San Francisco, and Denver.
Zonda tracks future lots through the stages of development, ranging from raw land through streets in (the last stage before a lot becomes a VDL). Total upcoming lots, which indicates delivery in the next 12 to 18 months, increased 1.4% in the fourth quarter but decreased 1% compared to the third quarter. These types of lots were down 14% from their 2022 peak, but were up 16.7% compared to the same quarter in 2019.
The largest share of total upcoming lots (396,000) were in the excavation stage, with an expected delivery between the third and fourth quarter of 2026.
“Seeing a reduction in the number of upcoming lots quarter over quarter is a positive sign considering current market conditions,” Wolf said. “While ongoing lot development remains important, it’s equally important to maintain discipline. If lot development drops too sharply, there could be a serious shortage when consumers eventually return to the market. On the other hand, moving forward too aggressively also poses risks, especially since there are already many vacant developed lots available today.”
