Don’t Be Misled by the “Drop” in Housing Starts: Some Markets are Showing Large Increases in Homebuilding

Posted in Economy, National Housing Market | Posted on 06-16-2015 | Written by Metrostudy News

June 16, 2015 – The government’s June report on housing starts showed an 11.1% decline, but that was on the heels of an incredibly strong report the previous month.   

We at Metrostudy have just completed another complete count of builder activity and new-home supply in markets all around the nation, and it provides strong quantitative evidence that the demand for new homes is still recovering, albeit slowly.  Furthermore, builders in most markets are confident that this slow-motion rebound will continue.  That is why builder confidence has improved and lot development is up 21.5% compared with a year ago (from the latest Metrostudy research).

The supply of new homes remains tight.  Finished new-home inventory is still at 2.5 months of supply, which is in the historically normal range, but somewhat low for a market that is starting to revive rapidly.  This explains the high rate of price increases on new homes.

There is much more detail available in Metrostudy’s research than is evident in the government data; some markets are actually showing very strong increases in homebuilding.  Here are some of the markets that we have found are increasing home production the most.  The former “bubble” markets figure prominently in this list, reflecting the fact that they had fallen so far during the downturn.

Recently-reported Metrostudy quarterly data, construction of single-family detached homes, versus four quarters ago.

  • Northern California                         +46.3%
  • Reno                                                     +44.9%
  • Las Vegas                                            +36.5%
  • Naples/Ft. Myers                             +27.4%
  • Tampa                                                  +15.4%
  • Atlanta                                                 +15.0%
  • Denver/Co. Springs                         +14.9%

Brad Hunter is Chief Economist of Metrostudy.

About Metrostudy

Metrostudy, a Hanley Wood company, is the largest provider of comprehensive research and insight for the real estate industry. Builders, developers, banks, manufacturers, retailers and many other industries all rely on Metrostudy’s data and analytics to support strategic business decisions at the local, regional and national market level.  www.Metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; high-profile executive events; and strategic marketing solutions. To learn more, visithanleywood.com.

 

Denver Housing 1Q15: Market is Squeezed as Prices Rise and Resale Supply Contracts

Posted in Denver - Colorado Springs Market | Posted on 06-03-2015 | Written by Metrostudy News

  • New Home Starts are flat in the first quarter but traffic and sales contracts are up 29% and 39%, respectively, over last year
  • Major impediments to growth in this market include higher home prices – currently only 14% of the new home market is priced below $300k, and tight construction trade labor
  • Denver’s resale market continues to post remarkable numbers that confirm the high rate of demand for housing

June 2015 – According to Metrostudy’s quarterly lot-by-lot field survey 1,679 homes were started in 1Q15, down 7% from 4Q14 and up 0.1% from 1Q14. Housing starts are essentially flat for the quarter, which would be concerning if traffic and sales contracts for the first quarter weren’t up 29% and 39% over last year respectively. Builder backlog continues to swell as most still face significant challenges with tight trade labor getting homes built in a timely manner. Despite continued strains on trade labor, builders have still started 7,930 homes in the last 12 months, a 16% increase from 1Q14. Builders closed 1,659 units in the first quarter, an increase of 23% from 1Q14. This large increase was expected as 2nd and 3rd quarter starts in 2014 were the highest in the last seven years. Annual closings in 1Q15 increased 10% to 7,026 units compared to 1Q14. With a robust economy and strong in-migration, along with growing buyer traffic and contracts activity, it’s a fairly safe bet that that both new home starts and closings will increase in the second quarter, and throughout the remainder of the year.

“Along with trade labor shortages, the other major impediment to housing growth in 2015 and beyond is higher home prices,” said John Covert, Director of Metrostudy’s Denver region. “Strong demand for move-up buyers combined with rising costs have placed more emphasis on higher priced product over the course of the last several years. The trend continues as all price points above $350,000 have experienced market share increases since 2013 with the strongest growth in the $400,000- $500,000 segment. With demand shifting to move-up product and only 14% of the new home market priced below $300,000, the average sales prices are skewed higher, now at $459,557 for the trailing 12 months ending in March, which is back to the previous high in December 2007.”

Despite the increase in home starts, vacant developed lot (VDL) inventory in the Denver Market has increased +12% since 1Q14 to 11,262 lots for a 21 month supply. Metrostudy considers 18-24 months of lots to be equilibrium for the entire market, a range that varies from one jurisdiction to another. Lot deliveries, which have outpaced starts recently, are up 62% from a year ago with most coming in the Parker, Arvada, Castle Rock, and West Adams submarkets, among others. In active projects, lots are virtually nonexistent for homes priced under $250,000 and months’ supply hovers between 9 and 16 months for the $250,000-$399,000 segments.

At the end of March there were 5,731 new homes in inventory, up 19% from a year ago and essentially flat compared to last quarter. Of that total, 4,020 are single family detached units that are either under construction, finished & vacant or model homes (total inventory). Inventory levels for SFD are at 8.6 months compared to 7.8 months a year ago – and slightly above the 7.0- 8.0 months considered to be equilibrium for SFD total housing inventory. While closings are higher, which would normally bring down months of supply, there are some 600 more homes under construction this quarter than a year ago which has pushed months of supply higher. Most of these homes are already sold, but have yet to close so the higher months of supply figure will almost certainly fall in the next quarter. There are another 1,711 attached (condo, townhome, duplex) units in total inventory, up from 1,501 units in 1Q14, an increase of 14%.

“Most of the increase has come by way of paired or townhome product, which represents 1,126 of the attached units in inventory,” said Covert. “Townhomes and paired product has experienced a 34% increase in homes starts in the last year. Many of these projects have found their way back into the suburban market, within master planned communities, and are serving the increasing void left by scant condominium development which had traditionally served the entry-level buyer.”

Denver’s resale market continues to post remarkable numbers that confirm the high rate of demand for housing in Denver. The number of active listings fell to a new low in March, putting extreme pressure on buyers desperate for housing that has become increasingly difficult to find as we enter the strongest buying season of the year. There were only 4,112 active listings at the end of the year compared to over 7,000 a year ago. As would be expected, new listings jumped nearly 70% over the year, the vast majority of which already have contracts on them, leaving an active listings count at extremely low levels. Months of supply now sits at 0.9 months, down from 1.6 months a year ago. As expected median home prices are pushing higher, up 19% over the year to an all-time high of $345,000 for single family detached resales in Denver.

So far, tight trade labor and rising home prices haven’t shut off the industry’s ability to deliver homes. But many wonder at what point consumers will forego a more expensive new home that takes longer than normal to deliver and look for other alternatives. The problem they’ll face, at least in the short term, is an incredibly tight resale market where few options exist. Given the constraints the industry is facing, Metrostudy believes the market will still grow in 2015, but not nearly at the pace possible if more affordable product appealing to entry-level buyers was available.

For information contact:
John Covert – 720.493.2020 x 201
jcovert@metrostudy.com

About Metrostudy

Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide.  Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.  www.metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

California Central Valley 1Q15: Demand Stabilizing in the More Expensive Markets; Picking Up in Affordable Areas

Posted in Central California Market | Posted on 06-01-2015 | Written by Metrostudy News

  • Through 1Q15, the annual starts rate is up 4% YoY, with starts higher in seven of eight counties
  • Price increases have been moderate as builders are reaching affordability limits and may be more concerned with maintaining absorption pace
  • The San Joaquin/Stanislaus region will benefit most from the rapidly improving Bay Area market as buyers move inland to find more affordable and abundant housing.

June 2015 – Metrostudy’s 1Q15 survey of the Central California region shows that the improving job numbers seem to have had a positive impact in the new home market this quarter. Annual starts and closings as of 1Q15 improved, with starts up 4% to 6,176; and closings up 2.4% to 5,748. This is indicative of a stabilizing housing market. Builders are adjusting pace based on current demand.

“Compared to 1Q14, annual new home starts were higher in 7 of the 8 counties Metrostudy monitors,” said Greg Gross, Director of Metrostudy’s Central California region. “Starts in Fresno County were 12% lower than this time last year. Merced had a very impressive increase of 70% as did Tulare County with a 23% increase in starts suggesting demand is beginning to stabilize in the more expensive markets, and picking up in the more affordable markets.”

Regionwide the average “offer to build” base price for new Single Family detached homes increased a modest 2% to $318K compared to 1Q14. Builders are reaching affordability limits and may be more concerned with maintaining absorption pace and are adjusting prices accordingly. In some submarkets, higher priced product is being offered as builders are seeing increased traffic and demand, especially in Kern, Fresno, and San Joaquin Counties.

Finished inventory of homes has decreased during the 1st quarter. Metrostudy counted 1,060 Finished Vacant Single Family homes this quarter; the market now has 2.2-months of supply, an improvement from fourth quarter. We will continue monitor these inventory levels as there are an additional 2,020 new homes under construction. Builders will need to adjust to the changing demand dynamics expected in 2015.

The Central Valley has been absorbing more lots than were delivered for most of the past three years, making a noticeable dent in the number of finished lots. 2014 did experience a slight reversal in this trend as 6,216 new lots were added to the supply.

As 2015 begins, the Central Valley demonstrated a fairly respectable economic improvement, especially considering the extreme drought, tightened lending standards, rising construction costs and overall economic uncertainty.

“Overall job growth remained positive so far this year and improved in most all counties; this should keep the demand for new homes moderate,” said Gross. “We are optimistic that pent up demand will continue through 2015, but the challenge will be converting this demand into buyers. The San Joaquin/Stanislaus region will benefit most from the rapidly improving Bay Area market as buyers move inland to find more affordable and abundant housing, especially with falling gasoline prices.”

Metrostudy expects the Central Valley housing market to remain steady over the course of the next year. Notably, Kern, Fresno, Stanislaus and San Joaquin Counties will be most stable and consistent housing markets in all of Central Valley.

For information contact:
Greg Gross – 916.231.9370
ggross@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visithanleywood.com.

 

Las Vegas 1Q15 Housing – Market at 2008 Levels Even as Lot Supply & Affordability Issues Threaten Further Growth

Posted in Las Vegas Market | Posted on 06-01-2015 | Written by Metrostudy News

  • 1Q15 New Home Starts are up 45% YoY and at the highest fist quarter level since 1Q07;
  • Entry and mid-level product will be opportunistic as the market continues to improve. The median price for Single Family product is up 7.4% YoY.
  • Lot supply remains at record low levels – the future of the home building industry in Southern Nevada may just rest in the hands of the BLM.

June 2015 – Metrostudy’s 1Q15 survey of the Las Vegas housing market shows that new home starts are 45% higher compared to 1Q14 as builders remain confident in the market. In fact the first quarter of 2015 saw the highest number of first quarter starts since 1Q07. The annual start pace increased by 7% YOY. Through 1Q15; annual single-family new home closings were 5,639, 14% less than in 1Q14. Quarterly closings were 5% higher however. All of which can be indicative of both slightly weaker demand and very tight lot supply.

Total Finished Vacant housing inventory has decreased 12% this year. Builders needed to replenish their vacant inventory to satisfy demand, yet these inventories are being effectively managed. Single Family product which represents 45% of all inventory; has only 1.7 months of supply at current pace. However annual closings of condos improved dramatically during the past 2 years which lowered the condo supply considerably.

“One of the most challenging issues over the past year was the availability of lots and the impact on land prices,” said Greg Gross, Director of Metrostudy’s Las Vegas region. “Over the course of 2014, the total number of lots in development declined but that reversed during the first quarter as projects are seeing much more rapid development. The future of the home building industry in Southern Nevada may just rest in the hands of the BLM.”

Builder confidence in the market remains strong as the market is at 2008 levels. However affordability may be reaching a point which may begin to force first time buyers out of the market for new homes especially now that investors are realizing the opportunity in Southern Nevada.

Pricing in the resale market has improved rapidly. Average sales price for Single Family Homes increased 7.4% this year with Median sales price also increasing 5.1%. Compared to March 2014, the average asking price of for-sale homes is 12% higher at $335k.

“Production under $200K represents only 7% of all housing starts for the quarter compared to 1Q14 when 12% where under $200K,” said Gross. “The market is beginning to see more slightly affordable attached product entering the market. Our median “offer to build” price for all SFD active projects is $304K; 7.4% higher than one year ago. Entry and mid-level product will be opportunistic as the market continues to improve. The attached home market has seen the median sales price increase more than 14% this year.”

The net absorption of lots highlights the dearth of deliveries as we continue to deplete the supply even as 6,895 new lots were added during the past four quarters, we started 6,400 new homes.   The majority of the new lots in development are in Summerlin, Inspirada, Cadence and the general Southwest Valley. It is worth noting that this number of finished lot supply remains at record low levels, lowest since Metrostudy began counting in 2002.

For information contact:
Greg Gross – 916.231.9370
ggross@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visithanleywood.com.

Homeownership Still Correcting: An Analysis by Age Group

Posted in Economy, National Housing Market | Posted on 05-26-2015 | Written by Metrostudy News

  • We are in the strongest period of renter growth going back to the 1960s, when the Census began tracking rent vs. own.
  • Each of the three younger age segments have experienced a shrinking number of home-owning households, totaling a decline of 6.85 million over the last ten years.
  • The 55 to 64 group is unique in that the homeownership rate has shrunk (82 percent to 76 percent), yet the strong growth in the number of households allowed the number of homeowners to grow by 3.9 million.

MAY 2015 – Have you ever taken your temperature and been relieved to find out you had a fever? You say to yourself, “No wonder I feel so bad.” I had a similar moment while researching national homeownership trends, which dropped to a 25-year low of 63.7 percent in 1Q15. What is less often reported is that the number of households has grown steadily during this time from just under 93 million in 1989 to over 123 million in 2014. Furthermore, even though the percentage of homeowners is unchanged compared to 25 years ago, because of overall household growth there are now nearly 20 million more home-owning households in the U.S. compared to 1989.

The problem has to do with trends in the last 9 years. During this time the number of households has grown by nearly 10 million (plus 9 percent), yet the number of home-owning households has grown by only 660,000, which is less than 1 percent growth. Conversely, the number of rental households has grown by 9.2 million or plus 26 percent. This certainly explains why the apartment market has been so robust. Currently, multi-family permits (mostly apartments) account for 36 percent of all permits, compared to an average of 19 percent from 2000 to 2006. This is the strongest period of renter growth going back to the 1960s, when the Census began tracking rent vs. own.

55 Plus

That is one step to understanding the lack of strength in homebuilding, but it doesn’t totally explain the problem. Therefore I analyzed homeownership by age group, particularly over the last 10 years. First of all, in households where the head of household is below 35 years of age, overall household growth has been very flat. This is expected to change as echo boomers (children of baby boomers) age into this category, but for now the household count is very steady. Unfortunately, the number of home-owning households is shrinking, a decline of 1.85 million compared to 2004. This demographic is saddled with student loans, and they appear to value the benefits of renting … for now.

The 35 to 44 age range was easily the most devastated by the Great Recession. Not only is this a shrinking demographic (baby busters), but homeownership has shrunk from 70 percent to 59 percent in the last ten years. The combination of these two forces resulted in a decline of 3.8 million home-owning households in the last ten years. Many of these households may be inclined to own, but they need to repair their credit and get on firmer financial footing. This is also true to some extent of the next older category, 45 to 54, where the number of home-owning households has declined by 1.2 million since 2004. That means each of the three younger age segments have experienced a shrinking number of home-owning households, totaling a decline of 6.85 million over the last ten years.

Below 55

The 55 to 64 group is unique in that the homeownership rate has shrunk (82 percent to 76 percent), yet the strong growth in the number of households allowed the number of homeowners to grow by 3.9 million. These are the baby boomers, and they have driven the move-up market and kept the homebuilding industry off the mat. The oldest demographic at age 65+ is the largest group, nearly 29 million strong as of 2014. The homeownership rate is flat at 80 percent, and the number of home-owning households has grown the most – plus 4.3 million. This group will continue to grow as Americans live longer and as baby-boomers age into this segment. Combined, the two older household segments have contributed 8.2 million new homeowners in the last ten years.

Even though homeownership has continued to decline well after the end of the Great Recession, forces should begin to push the homeownership rate modestly higher in the coming years. When this happens, it will signify an important shift for our industry. This shift combined with a growing economy (hopefully), will fuel a stronger homebuilding market and begin to take away some of the energy that has been dedicated to apartments. This will be the aspirin we need to shed the low-grade temperature we’ve been running as an industry over the last few years.

Ben Sage, Director of Metrostudy’s Mid-Atlantic Region, has been researching and analyzing housing markets since 1994. He regularly meets and consults with many of the top homebuilders in the country as well as with lenders, developers, investors, and utilities concerning trends in the local economy and their effect on the real estate market. Ben can be reached at bsage@metrostudy.com. For more information, visit www.metrostudy.com.

 

 

Philadelphia Market 1Q15: 2015 Off to a Slow Start; Market is Constrained by Limited Land and Lot Availability

Posted in Philadelphia - Market | Posted on 05-20-2015 | Written by Metrostudy News

  • 1Q15 New Home Starts in the Philadelphia region are down 11.6% YoY; starts in the Philadelphia MSA are down 21.7% YoY.
  • New subdivisions that became active in the past year are moving at a exceptionally faster pace than old legacy subdivisions
  • Overall, the region is capped by the limited supply of high valued land while also being constrained by limited lot availability in job center markets

May 2015 – Metrostudy’s survey of the Philadelphia region’s housing market shows that there were 1,978 home starts in 1Q15, down 10.6% from 4Q14 and a 11.6% decline from 1Q14. The annual starts pace ending 1Q15 stands at 9,667, a decrease of 2.6%. Closings or move-in’s saw a larger drop off of 25.7% quarter to quarter and year over year had an 11% decrease. The annual closings pace for the 1st Quarter of 2015 was 9,792 a 2.3% decrease off of the pace for 4Q14.

The Philadelphia MSA had 963 starts for 1Q15 which is down 15.8% from 4Q14. Year over year starts dropped 21.7%. Annual pace of starts came in at 4,800. That was a 5.2% decrease off of the pace last quarter. Closings for the MSA came in at 908 which is a 33% drop off of last quarter. Looking at the numbers year over year showed a decrease of 21.6%. Annual closings came in at 4,909 for 1Q15 versus the 5,160 pace last quarter which represents a 4.8% drop in pace.

“Analyzing the numbers looks like there was a big drop off in activity, but it is more about the amount of active subdivisions in the market,” said Quita Syhapanya, Director of Metrostudy’s Philadelphia market. “There were 581 active subdivisions in 1Q14 versus 501 for 1Q15. Overall the region is capped by the limited amount of supply of high valued land while also being constrained by the limited amount of finished lots that are currently available. The volume and activity can only gain momentum when the supply opens up to feed the demand. The housing market is catering towards the move up buyers only with first timers still figuring out their finances for rent versus buy. New subdivisions that became active in the past year are moving at a faster pace than old legacy subdivisions.”

The median closing price for a new home in the Philadelphia region was $337,300 an uptick of .3% quarter to quarter. Year over year change was a 3.9% increase for the 1st Quarter of 2015 over the same period last year. The median closings price for a single family home ended the 1st Quarter at $356,200. It was a small fraction of a decrease from the prior quarter. Year over year the price for a single family home increased 4.8%. Price increases the past three years for the 1st Quarter have slowed down.

In 1Q15, there were 22,548 Vacant Developed Lots (VDL) in the Philadelphia Region. Finished lots decreased by 1.3% quarter to quarter. Year over year vacant developed increased by 4.5%. The region’s vacant developed lot months of supply increased to 28 months from 27.6 the prior quarter. A healthy market supply level for equilibrium would be between 24 to 30 months.

In the Philadelphia MSA there are only 7,998 finished lots available in the market. There is 20 months’ worth of finished lots. Months of supply increased from the 19.6 months from the prior quarter due to the slight slow down in pace of annual starts. The Philadelphia MSA continues to be in short supply of available finished lots.

“Most of the new home construction occurring in Philadelphia is happening in and around the city with luxury townhomes replacing old existing row homes,” said Syhapanya. “Condos are making a big comeback in the city of Philadelphia as well. Philadelphia County only has 8.3 months of supply. Montgomery County which is an in demand market with good schools only has 15.1 months of supply. Chester and Bucks counties are both still less than 20 months of supply for finished lots with 19.8 months for both counties.”

The Philadelphia region can be broken up into three distinct markets. We have the Philadelphia Metro, South Jersey market, and Delaware market. Within each market there are submarket and specific communities that carry most of the market when it comes to activity.

The South Jersey market has various dynamics that have slowed progress in housing. There are some positive economic initiatives that could help spur further economic growth which could bring jobs and home buying activity that follows the jobs in the future. The backlog of foreclosures has most likely peaked in September of 2014 and there is light at the end of the tunnel as South Jersey works to get to a normalized housing cycle.

The state of Delaware is having a renaissance of sorts in parts of Sussex County east towards the shore and in submarkets within New Castle County. There are many advantageous of living in Delaware, including no personal property taxes, no sales tax, and social security benefits are not taxed which is a big draw for the active adult group. The new home construction numbers bear that out with the pace of starts and closings for Delaware out pacing the rest of the region. The annual pace for starts is at 3,609 and closings at 3,673. The closings pace has risen the past 3 quarters and increased 3% for 1Q15 versus the pace to end the last quarter of 2014.

The five county Philadelphia Metro has seen solid activity across all the counties. When looking at the numbers single family new home housing inventory sits at 6.7 months of supply and only 17.6 months of supply for vacant developed lots (finished lots) in the market. The Townhome/Duplex product type has been driving activity in the Philly metro area. To close out 1Q15 Townhomes/Duplex started 1,561 homes and closed 1,450 on a rolling 4 quarters. Looking at starts year over year they are up 4%. The Philadelphia Metro is under supplied across the board and even more so around prime locations with easy access to job centers.

For information contact
Quita Syhapanya
215.893.9890 x231
qsyhapanya@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; high-profile executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

 

Northern New Jersey/New York Suburbs 1Q15: Demographics are Driving the Market: Retirees go Central while Millennials Look to Rent, not buy

Posted in New Jersey Market | Posted on 05-20-2015 | Written by Metrostudy News

  • New home starts in 1Q15 were up 11.5% from 4Q14, but down 14.8% from 1Q14
  • Median closing prices for single-family homes stand at $452k, down 4.4% YoY, even as condo sales prices have risen 30% in the same period.
  • We have seen a 11.9% rise in lot deliveries, an encouraging sign for new home starts in the coming summer months.

May 2015 – Metrostudy’s 1Q15 survey of the housing market in the Central/Northern New Jersey & NY Suburbs region shows that new home construction has been constrained by the limited amount of buildable land in the region. The limited supply in desirable locations has kept a cap on new home construction activity. In parts of Hudson County as well as parts of Bergen, condo sales are driving the market.

“Overall the market has its challenges, but there are two distinct demographics that are looking to make a home in both Central & Northern NJ,” said Quita Syhapanya, Regional Director for Metrostudy’s Northern New Jersey & New York Suburbs market. “You have 55+ groups looking at towns in Central NJ and the millennial group looking to rent rather than buy. Thirty percent of the closings in Central New Jersey can be attributed to the various active adult communities being offered in this market.”

Our survey shows that this market had 756 new home starts in 1Q15, a 11.5% increase from 4Q14. Year over year, starts for the 1st Quarter showed a 14.8% decrease from an fairly decent 1Q14. Quarterly closings for the market also showed declines in activity. For the 1st Quarter there were 1,112 closings, a 2.4% decrease from 4Q14. Year over year saw a 10.3% decrease in buyers moving into their new homes. 1Q15 closings are close to the average since Metrostudy started tracking the Central/Northern New Jersey & NY suburbs in 2Q13.

The annual pace of starts and closings for a rolling 4 quarters saw a decrease of 5.9% in annual starts and a 2.6% decrease in annual closings. Annual starts for the 1st Quarter came in at 3,727 versus the 4,744 annual closings. These indicators will be important to monitor in the 2Q and 3Q when activity is at its highest.

Total housing inventory ended the 1st Quarter with 6,704 units, a 5% decrease from 4Q14. Year over year also saw a drop off by 10.8%. Units that are under construction stand at 3,356, a 2.7% decrease from 4Q14. Year over year looking at the 1st Quarter also saw a 12.4% downward swing from this time last year when there was 3,835 units under construction. Finished vacant inventory decreased by 7.4% to 3,074 from the 3,322 vacant standing units in 4Q14. Year over year it is a decrease of 12.4% which is one indicator that shows some improvements to the market. Total Inventory months of supply for the 1st Quarter is at 17 months which decreased from 17.4 months from the prior quarter. The months of supply has decreased the past three quarters and is at its lowest level since Metrostudy started tracking the market. The market is still on the high side in regards to housing inventory months of supply only because of the condo units that are in the market that still have unoccupied units.

The median closing price for a new home closed in the Northern New Jersey/NY Suburbs for the 1st Quarter was $429,200, a 2.8% decrease quarter to quarter. Year over year for the 1st Quarter saw a 10.5% increase in the median sale price of a new home. The median closing price for a single family home for 1Q15 was $452,200, which is a 4.4% decrease year over year and an 8.2% decrease from 4Q14. Condo sales prices have strengthened, with demand driving condo prices up 30% year over year.

For 1Q15 there are 9,156 Vacant Developed Lots (VDL) in the market, a .5% decrease in developed lots in the region from 4Q14. From the 1st quarter of this year versus the 1st quarter of last year there has been a 3.7% increase in developed lots. With an annual starts rate of 3,727 it would take 29.5 months to go through the remaining lots at this pace. The months of supply increased 1.2 months from last quarter. The slow-down in starts due to some weather related issues at the tail end of the quarter contributed to the increase in VDL months of supply. A healthy market supply level for equilibrium would be between 24 to 30 months. The Northern New Jersey/NY Suburban market remains in equilibrium, but is teetering on being slightly over supplied in finished lots.

“There were 714 lots delivered into the market,” said Syhapanya. “A nice uptick from the prior quarter by 11.9%. An encouraging indicator can be seen in the year over year lot deliveries where a 61.1% increase can be seen from 1Q14. There is very limited land available for new development in the market so a 61.1% year over year increase is a very good sign for possible new home starts in the summer months ahead.”

Central New Jersey has been the most active market in the region. Central NJ had 415 starts in 1Q15 which is a 32.5% jump from 4Q14. Year over year had a decrease of 11.7% in starts activity. Closings for 1Q15 showed tremendous progress with 694 closings, the most since Metrostudy started tracking the market. Big condo projects are planned for 2015 and beyond with many apartments coming online in the very near future as well. Developers are able to take advantage of the demand for housing across the Hudson from New York City to build large scale projects.

For information contact
Quita Syhapanya
215.893.9890 x231
qsyhapanya@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; high-profile executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

INLAND EMPIRE HOUSING 1Q15: A Market in Search of Qualified Buyers; Affordability Issues are Key

Posted in Inland Empire Market, Southern California Market | Posted on 05-20-2015 | Written by Metrostudy News

  • Metrostudy’s 1Q15 survey shows the Annual Starts rate in the Inland Empire is up 23.1% YoY;
  • Affordability concerns are keeping potential buyers in the rental market, with rental occupancy rates averaging 95% across Southern California
  • The difference between new and resale median prices is over $135,000 in the Inland Empire, with less than 30% of home buyers currently able to afford a new home

May 2015 – Metrostudy’s 1Q15 survey of the housing market in the Inland Empire showed the annual starts rate at 6,002, up 6.8% from 4Q14. Year-over-year annual starts experienced a significant jump from 4,875 starts in 1Q14 or up 23.1%. The current housing inventory monthly supply stands at 9.5 months, not much different than 4Q14, but it is 2.3 months higher than 1Q14. Vacant Developed Lots increased from 16,597 lots in 4Q14 to 17,002 lots in 1Q15, with monthly supply dropping from 35.5 months to 34 months during the same period. Annual Closings increased from 4,795 in 4Q14 to 5,059 in 1Q15, or up approximately 5.5%. Since 4Q14, quarterly closings have decreased from 1,490 to 1,296 or down 13%.

 “The highest volume of 1Q15 starts occurred in the following price segments: $300k – $400k (37% of starts) and $400k – $500k (28%),” said Dennis Handler, Director of Metrostudy’s Southern California region. “Approximately 81% and 85% of housing inventory and VDL inventory falls below the $500k range, respectively.

Starts by County (4Q14 to 1Q15)

Riverside County starts increased from 702 to 945 (+34.6%), and annual starts increased from 3,790 to 3,956 (+42.6%).

San Bernardino County quarterly starts increased from 490 to 583 (+19%), and annual starts increased from 1,827 to 2,046 (+12%).

Closings By County (4Q14 to 1Q15)

Riverside County closings decreased from 1027 to 910 (-11.4%), and annual closings increased from 3,246 to 3,444 (+6.2%).

San Bernardino County closings decreased from 463 to 386 (-16.6%), and annual closings increased from 1,549 to 1,615 (+4.3%).

Vacant Developed Lot Inventory (4Q14 to 1Q15)

Riverside County VDL’s increased from 8,804 lots to 8,995 lots (+2.2%). VDL monthly supply is 27.3 months.

San Bernardino County VDL’s increased from 7,793 lots to 8,007 lots (+2.7%). VDL monthly supply is 47 months.

In 1Q15, the Inland Empire real estate market experienced similar characteristics to the broader Southern California market, as resale transactions dropped off considerably. However, resale inventory remains fairly strong at a 6-month supply and prices of both new and resale homes have displayed positive appreciation. Unfortunately, the average days on market for resale homes remain in the 115-day range with no foreseeable change in this trend. New construction annual starts and annual closings have continued to display further separation as closings maintained a fairly flat trend through half of 1Q15 while starts began to accelerate. Since 2011, annual starts and closings have more-or-less been in-line with each other offering positive energy and confidence for the builder community. In addition, inventory levels have begun to creep up, specifically finished vacant home inventory. Overall, the Inland Empire market appears to have lost some momentum due to a drop in consumer demand and limited affordable product supply.

“Fundamentally, the economic conditions are favorably moving in the right direction due to consistent job growth and lower unemployment, low interest rates, and growing consumer confidence,” said Handler. “Affordability and number of qualified buyers are still primary factors that have a significant impact on the new home buyer market. The difference between new and resale median prices is over $135,000 in the Inland Empire, with less than 30% of home buyers currently able to afford a new home, which combined with limited product inventory at the lower-end of the price spectrum, has major implications on the home building industry through the balance of 2015. Alternatively, the rental market continues to benefit as rental rates are expected to remain stable with occupancy rates averaging 95% across Southern California.”

In general, the Inland Empire is experiencing a relatively stable economic environment. Optimism for gradual economic improvement remains strong and expected to continue through 2Q15. The job market is also maintaining a steady flow of new jobs with unemployment rates continuing to move closer to the national average. Interest rates are still low, with no foreseeable increase in the short-term, and the housing market is also operating at a stable and manageable pace.

For information contact: Dennis Handler
email: dhandler@metrostudy.com

About Metrostudy

Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide.  Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.  www.metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

CALIFORNIA COASTAL COUNTIES 1Q15 Housing: Affordability is the Story as Production Moves to Higher Price Points

Posted in Southern California Market | Posted on 05-20-2015 | Written by Metrostudy News

  • Metrostudy’s survey of 1Q15 new home starts in the Coastal Counties shows a decline of 30% from 1Q14
  • Affordability is key as starts at lower price points are squeezed out – 28% of 1Q15 starts were over $900k
  • In both Los Angeles and Orange counties, less than 30% of home buyers can currently afford to purchase a new home, which combined with limited product inventory at the lower-end of the price spectrum, has major implications on the home building industry moving forward through 2015.

May 2015 – Metrostudy’s 1Q15 survey of the new home market in California’s coastal counties – Los Angeles, Orange, and Ventura – shows that annual new home starts stand at 8,040, down 9.2% from 4Q14 levels. Year-over-year first quarter starts experienced a significant decline from 2,731 starts to 1,910 or -30%. The current housing inventory monthly supply stands at 8.9 months, which is also just slightly up from 8.6 months in 4Q14. Vacant Developed Lots increased from 7,350 lots to 7,410 lots in 1Q15 or from a 10-month supply to 11.1 month supply as Builders continue to assess the absorption rates across their new communities before adding more to the current supply. Annual Closings decreased from 8,259 in 4Q14 to 8,034 in 1Q15, or down approximately 3%. Since 4Q14, quarterly closings have decreased from 2,104 to 1,875 or 11%.

 The highest volume of 1Q15 starts occurred in these major price segments: $900k< (28% of starts), $400k – $500k (16%), $500k – $600k (15%) and $600k-$700k (12%),” said Dennis Handler, Director of Metrostudy’s Southern California region. “Approximately 56% and 50% of housing inventory and VDL inventory falls above the $700k range, respectively.”

Starts by County (4Q14 to 1Q15)

  • Los Angeles County starts increased from 654 to 889 (+36%), yet annual starts decreased from 3,810 to 3,415 (-10.4%).
  • Orange County quarterly starts decreased from 950 to 888 (-6.5%), and annual starts decreased from 4,383 to 3,985 (-9%).
  • Ventura County starts decreased from 165 to 133 (-19.4%), and annual starts decreased from 668 to 640 (-4.2%).

Closings By County (4Q14 to 1Q15)

  • Los Angeles County closings decreased from 851 to 760 (-11%), and annual closings decreased from 3,464 to 3,210 (-7%).
  • Orange County closings decreased from 1,158 to 932 (-19.5%), and annual closings decreased from 4,293 to 4,258 (-1%).
  • Ventura County closings increased from 95 to 183 (+93%), and annual closings increased from 502 to 566 (+12.7%).

Vacant Developed Lot Inventory (4Q14 to 1Q15)

  • Los Angeles County VDL’s increased from 3,005 lots to 3,170 lots (+5.5%). VDL monthly supply is 11.1 months.
  • Orange County VDL’s decreased from 3,565 lots to 3,479 lots (-2.4%). VDL monthly supply is 10.5 months.
  • Ventura County VDL’s decreased from 780 lots to 761 lots (-2.4%). VDL montly supply is 14.3 months.

The Southern California real estate market has continued to display a slowdown in 1Q15 as new construction annual starts and closings have begun to teeter down along with declining resale transactions and longer average days on market. Fundamentally, the economic conditions are favorably moving in the right direction due to consistent job growth and lower unemployment, low interest rates, and growing consumer confidence.

“Affordability and number of qualified buyers, however, are still primary factors that have a significant impact on the new home market,” said Handler. “The difference between new and resale median prices is over $250,000 in Orange County and over $100,000 in Los Angeles County. In both counties, less than 30% of home buyers can currently afford to purchase a new home, which combined with limited product inventory at the lower-end of the price spectrum, has major implications on the home building industry moving forward through 2015. Alternatively, the rental market continues to benefit as rental rates are expected to remain stable with occupancy rates averaging 95% across Southern California.”

Going forward through 2015, builders should expect the Southern California market to continue along a fairly uneventful path. As it stands today, traffic at subdivisions is moderately improving, yet conversions are still struggling to stay above 1.7% and average weekly sales contracts are barely above one per week. Builders are competing for a very small buyer pool relative to the resale market, which is going to make effective marketing strategies and a strong understanding of buyer segmentation and preferences even more important in order to attract and convert new home buyer prospects.

For information contact:
Dennis Handler
dhandler@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

 

San Diego Housing 1Q15: The Market is Squeezed as Fewer Residents Can Afford New Home Product

Posted in San Diego Market | Posted on 05-20-2015 | Written by Metrostudy News

  • Our 1Q15 survey shows annual new home starts through 1Q15 down 21.3% from 1Q14 levels.
  • The Average price of a new home stands at $850k in 1Q15, down 11.5% from 4Q14
  • The difference between new and resale median prices is nearly $170,000 in San Diego County, with less than 23% of home buyers currently able to afford a new home.

May 2015 – Metrostudy’s 1Q15 survey of the San Diego County market shows annual new home starts decreased from 2,373 in 4Q14 to 2,188 in 1Q15, or down 7.8%. Year-over-year annual starts dropped 21.3% from 2,789 starts since 1Q14. Annual Closings increased from 2,235 in 4Q14 to 2,351 in 1Q15, or up approximately 5.2%. Since 4Q14, quarterly closings have increased from 467 to 576 or +23.3%.

Housing Inventory supply stands at 10.9 months, with levels increasing slightly from 2,103 lots in 4Q14 to 2,141 in 1Q15 lots (+1.8%). Vacant Developed Lot Inventory increased from 3,965 lots in 4Q14 to 4,040 lots in 1Q15, with monthly supply increasing from 20.1 months to 22.2 months during the same period.

“Starts by Price Range are broadly distributed across all major price ranges, with 26.1% of starts showing up above the $900,000 mark,” said Dennis Handler, Director of Metrostudy’s San Diego market. “Approximately 48% and 56% of housing inventory and VDL inventory falls below the $500k range, respectively. Single-Family Permit Activity through the first two months of 2015 totaled 687 permits, approximately 27% of total permits that were approved for all of 2014.”

Average resale price for single family detached homes increased from $618,556 in 4Q14 to $655,844 in 1Q15, or +6%. For all product types combined, the average resale price increased from $545,586 in 4Q14 to $582,139 in 1Q15 or +6.7%.  New annual average price for single family detached decreased from $960,948 in 4Q14 to $849,869 in 1Q15 or -11.5%. For all product types combined, the average new price decreased from $758,998 in 4Q14 to $713,804 in 1Q15 or -6.0%.

In 1Q15, San Diego County experienced similar characteristics to the broader Southern California market, as resale and new home transactions dropped off nearly 9% and 46%, respectively. However, resale inventory remains fairly low at a 4.4-month supply while new home housing inventory rests closer to an 11-month level. Currently, housing inventory and Vacant Developed Lot monthly supply levels appear relatively stable so long as starts and closings can maintain a somewhat close correlation.

“Average prices for new and resale homes moved in opposite directions as resale prices trended up approximately 6% and new home prices dropped by just over 11% due primarily to affordability of resales versus new homes, as well as builders increasing sales of smaller and more affordable product,” said Handler. “Average days on market for resale homes remain in the 80-day range with no foreseeable change in this trend. Fundamentally, the economic conditions are favorably moving in the right direction due to consistent job growth and lower unemployment, low interest rates, and growing consumer confidence. Builders are addressing affordability by offering smaller new product options at the low-mid range of the buyer price spectrum, thus driving buyer curiosity and higher levels of traffic to new subdivisions.”

Affordability and number of qualified buyers are still primary factors that have a significant impact on the new home buyer market. The difference between new and resale median prices is nearly $170,000 in San Diego County, with less than 23% of home buyers currently able to afford a new home, which combined with limited product inventory at the lower-end of the price spectrum, has major implications on the home building industry through the balance of 2015. Alternatively, the rental market continues to benefit as rental rates are expected to remain stable with occupancy rates averaging 95% across Southern California.

Going forward, builders should expect San Diego County to continue along a fairly stable path. As it stands today, traffic at subdivisions is moderately improving, with a strong bump in activity in 2Q15, yet conversions are still struggling to stay above 1.5% and average weekly sales contracts are averaging less than one per week. Builders are competing for a very small buyer pool relative to the resale market, which is going to make effective marketing strategies and a strong understanding of buyer segmentation and preferences even more important in order to attract and convert new home buyer prospects.

For information contact:
Dennis Handler
dhandler@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.