Growth continues to moderate in 2014: Higher Price Points are seeing strength

Posted in Sarasota - Bradenton Market | Posted on 11-21-2014 | Written by Metrostudy News

  • Sarasota’s new home starts for 3Q14 are up 20.4% over 3Q13; annualized rate is up 15.1% YoY
  • We continue to see a squeeze on first time and lower income homebuyers as the annualized rate of new home starts under $250k is down 26.5% YoY
  • Growth in starts is heading to the higher end: 193% of the growth came in price points above $250k

Metrostudy’s survey of the Sarasota-Bradenton housing market showed 1,032 single-family units were started in the third quarter of 2014, an increase of 20.4% over 3Q13. It marked the third time in the last four quarters that quarterly starts were over 1,000 units. The annual start rate compared to last year increased by 15.1%, to 3,975 annual starts. Single-family quarterly closings totaled 821 units, which was 5.8% higher than 3Q13. The annual closings rate was 3,585 units per year, which was 18.1% above the annual closings rate the same quarter last year.

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“For the twelve months ending September 30, 2014, new homes starts in price ranges under $250k totaled 1,349 units down 26.5% from the 3Q2013 annual activity,” said Tony Polito, Regional Director of Metrostudy’s Sarasota market. “Annual new homes starts in prices over $250k were up 62.2% for the twelve months ending September 30, 2014 versus 3Q2013. The marginal 521 unit increase in the annual start pace was split: 486 less units under $250k and 1,007 additional units above $250k.  193% of the growth came in price points above $250k.”

Inventories increased by 21.7% compared to the same quarter last year.  Compared to last year, under construction inventory rose by 316 units to 1,638. Finished vacant inventory increased by 11.3% from 302 units last year to 336 this year.  However, the number of move-ins exceeded completions during the quarter and FV inventory decreased by 45 units.  Model home inventory was up 40 units from last year at 212 total models. The increased model count is a clear sign of builder confidence.

This quarter 347 lots were delivered to the Sarasota- Bradenton market. Vacant developed lot inventory stands at 37,380 lots, a decrease of 1.9% compared to 38,098 lots last year. Based upon the annual start rate, this level of lot inventory represents a 112.8 month supply, a decrease of 20 months compared to last year. At the end of 3Q2014, Manatee County had a 26.3-month supply, down from a 27.5-month supply of VDL in 3Q2013. Sarasota County had a 30.0-month supply at 3Q2014, down from 41.4- month supply at 3Q2013. Housing activity increased in all three Counties, thereby reducing VDL months of supply.

“The double digit growth of 2012 and 2013 has moderated in 2014 and we suspect that housing starts growth will come in under 10% by year end,” said Polito.  “National economic worries have keep interest rates low during the quarter which is a positive for demand. However, a large percent of housing demand comes from retirees and empty nesters, which are less interest rate sensitive. A review of deed records indicates that pricing remains up. The overall market saw a 19.5% increase in prices versus mid-2013. However, over the last 90 days prices are up just 2.5%. Compared to last year, the average home is 13% larger at 2,267 SF and the price per square foot is up 5.6% to $130/SF. The winter forecast for much of the country is for temperatures colder than average, which is good for Florida builders.”

The final significant trend worth noting is new housing inventory. We consider FV equilibrium as between 1.5 and 2.0 months. The supply of finished vacant housing units has been dropping since 4Q2006. As of September 30, 2014, the months of supply of FV units for all of Sarasota/Bradenton stood at 1.1 months. We did see a 2Q increase in the number of units (up from 318 to 381) and the MOS (up to 1.3 months). That increase was erased in 3Q leaving a low supply going into “season”. The County by County finished vacant supply indicates that Manatee County is below equilibrium level of FV supply at 1.3 months. Sarasota County is even further below equilibrium level at 0.8 months. Charlotte County is now below equilibrium with a 1.2 month supply. The UC months of supply are up to 5.5 months from 4.5 months in 1Q2013. This should bring us some needed FV units by December, just in time for “snowbird season”.

The top three market areas based on annual starts are shown below.

Market Area                   Ann Starts (% Chg)

Manatee …………………………….. 2,119 (+2.8%)

Sarasota …………………………… 1,450 (+29.7%)

Charlotte …………………………….. 389 (+41.5%)

The table below ranks the top ten communities in the market by annual starts.

Community (Area)                              Ann Starts

Lakewood Ranch………………………………….514

The West Villages………………………………. 266

South Gulf Cove…………………………………..173

Palmer Ranch……………………………………..167

Grand Palm………………………………………..155

Esplanade By Siesta Key ………………………..130

Heritage Harbour …………………………………126

Harrison Ranch……………………………………. 94

Greyhawk Landing ……………………………….. 87

Copperstone……………………………………….. 66

During 3Q2014, Manatee County recorded 570 housing starts, down 2.2% versus 583 starts in 3Q2013. Sarasota County recorded 347 housing starts in 3Q2014 compared to 252 starts in 3Q2013, a 37.7% increase, as the West Villages, Palmer Ranch and Esplande by Siesta Key all saw new starts activity double from late 2013.

For information contact:
Tony Polito
813.888.5151
tpolito@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.

Prices Hold, Results Mixed

Posted in Tampa Market | Posted on 11-21-2014 | Written by Metrostudy News

  • While 3Q14 New Home Starts are up 10.8% over 3Q14, the annual starts rate is down 7%
  • Product below $200k is squeezed, as starts in that price range are down over 18% YoY
  • We are not seeing enough employment growth in the Tampa region to drive housing demand

Metrostudy’s 3Q14 survey of the Tampa housing market showed that 1,932 single-family units were started in the quarter, up 10.8% from 3Q13. Still, the annual starts rate, compared to last year, decreased by 7.0%, to 5,995 annual starts. Single-family quarterly closings totaled 1,499 units, which is 11.4% lower than the 1,692 closings during the 3rd Quarter of last year. The annual closings rate was 6,269 units which was 11.3% above the annual closings rate of 5,630 units for the twelve months ending 3Q13.

Total single-family inventory, which is composed of units under construction, finished vacant and models equaled 3,889 units on the ground at the end of the 3rd Quarter of 2014; an 7.4-month supply.  Compared to last year, the number of units under construction fell by 226 homes to 2,087 homes. Finished vacant inventory decreased by 8.1% from 1,590 units last year to 1,461 this year.  However, the number of completions exceeded move-ins during the quarter and FV inventory increased by 137 units versus 2Q14. The FV months of supply grew from 1.8 to 2.1 months.

This quarter, 2,462 lots were delivered to the Tampa market. This same quarter a year ago, we delivered 1,142 lots. Vacant developed lot inventory stands at 29,489 lots, an increase of 4.6% compared to 28,183 lots last year. Based upon the annual start rate, this level of lot inventory represents a 59.0 month supply, an increase of 6.5 months compared to last year.

Annual Starts by Price Range

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“For the twelve months ending September 2014, annual new home starts in price ranges under $200k totaled 1,639 units,” said Tony Polito, Director of Metrostudy’s Tampa region. “This was down 18.4% from the 3Q 2013 annual activity in prices less than $200k. New home starts in prices over $200k were down 1.8% for 2014 versus 2013. The marginal 448 unit decrease in the annual start pace was split: 369 fewer units under $200k and 79 fewer units above $200k.”

Ideally the Tampa Bay area would be adding 2,000 to 3,000 jobs monthly. In reality, Tampa Bay’s employment level grew by just 2,700 jobs from June 2014 to September 2014. This was not enough of a pace to create significant demand for new housing.  This lack of job creation was reflected in the local unemployment rate growing from 6.3% in June to 6.8% in August. The lingering concerns in the employment markets on a national scale have helped to keep interest rates low during the quarter.

“The year over year starts pace is being compared to the strong spring of 2013 and is down 7%,” said Polito. “However, the 3Q increase in starts exceeded the 2Q13 peak of this recovery cycle and may be a sign of builders starting extra spec units in search of year end closings. A review of deed records thru September indicates price increases from 2013 had held, but the rate of pricing growth has slowed substantially. Additionally, we are seeing more incentives being offered. Tampa’s new housing sector remains heavily reliant upon job creation and interest rates to drive demand.

The other significant trends involve new housing inventory. Finished Vacant units grew by 137 units during 3Q 2014 and at 2.1 months, the supply of FV units still needs to come down nearer to 1.5 months. The backlog of under construction units grew from 1,837 units as of June 2014 to 2,087 units as of September 2014. The UC months of supply has grown from 3.4 months for 2Q 2014 to 4.0 months as of 3Q 2014. The Under Construction MOS have been trending up the last two quarters. This was despite an increase in the number of units being completed; 1,682 units completed in 3Q versus 1,216 completions in 2Q.

Market areas based on annual starts are shown below.

Market Area                                Ann Starts (% Chg)

Hillsborough…………………………………….3,583 (-18.7%)

Pasco……………………………………………….1,584 (+3.6%)

Pinellas…………………………………………….513 (+66.0%)

Hernando……………………………………….180 (+48.8%)

The table below ranks the top ten communities in the market by annual starts.

Community (Area)                      Ann Starts

Magnolia Park………………………………………..185

FishHawk Ranch …………………………………….175

Sun City Center ……………………………………..155

Valencia Lakes……………………………………….151

Waterset ………………………………………………149

K-Bar Ranch ………………………………………….129

Lake Brandon ………………………………………..125

Seven Oaks …………………………………………..121

Concord Station……………………………………..119

Citrus Hills…………………………………………….118

Hillsborough County remained the most active county within the Tampa market. However, Hillsborough County lost market share, down from 68.4% for 3Q13 to 59.8% for 3Q14. Market share in Pasco grew from 23.7% for 3Q13 to 26.4% for 3Q14 as quarterly starts increased from 376 in 2Q14 to 523 for 3Q14. The VDL supply throughout all of Hillsborough County stood at 28.2 months. The VDL supply in Pasco stood at 48.7 months as of September 30, 2014. These two major counties accounted for 86.2% of all annual start activity in Tampa Bay as of 3Q 2014.

For information contact:
Tony Polito
813.888.5151
tpolito@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.

With Fading Affordability & Fence sitting Millennials, 2014 may be a year builders will be ready to forget

Posted in Phoenix - Tucson Market | Posted on 11-19-2014 | Written by Metrostudy News

  • Metrostudy’s 3Q14 survey of the Phoenix market shows starts down 10% for the year; closings are also trending down
  • We continue to see the strongest growth in the Northeast Valley
  • As affordability begins to fade and millennials content to wait it out it is expected that 2014 will be a lackluster year and one that some builders will be ready to forget.

November 2014:  According to the Metrostudy 3Q14 survey, home starts, attached and detached, in the Phoenix area numbered 10,755 over the last four quarters. Starts saw a larger decrease for the quarter down 10% for the year with the largest decline (23%) expected in Pinal County. The Northeast Valley continues to see the strongest starts growth year over year with an increase of 37.4% (860 starts). Closings over the last four quarters are also trending down to 10,891; though we had hoped that closings would remain flat for the quarter we are now trending down 5.9% for the year.

MLS listings continue to remain flat for the year with 23,195 listings in September. We are seeing higher listings than 2013, up 13%. Though sales have been down 13.86% from June 2014, we are still way below a normal resale market of 5-6 months of supply. The market is currently holding 3.9 months of supply. Days on market have been holding steady at 84 days since the beginning of 2014. In September of 2013, the days on market were 61 days.

For the four quarters ending in 3Q14, single family annual MLS sales numbered 71,972 units, down 14.8% from one year ago. The median price of a single-family home sold through the MLS dropped slightly in September reaching $199,000, a 4.7 percent increase from twelve months ago. The average price per square foot is trending down as well at $125.83 as reported by the Cromford report. Just as we are seeing in the new home market, it is no longer a seller’s market.

“The story remains much the same in the SE Valley, which is outpacing other submarkets by leaps and bounds,” said Rachel Cantor, Director of Metrostudy’s Phoenix Region. “Nine of the top 25 master planned communities in the Phoenix market are located in the SE Valley which includes The Bridges, Morrison Ranch, Eastmark, and Adora Trails. Though the starts look good, most builders that are sitting in subdivisions such as Eastmark or The Bridges are not currently feeling the wonders of being in the top 25 communities. The competition is constantly changing as builders fight to meet their end of year numbers and move specs in these communities. Buyers are attracted to this market for a number of reasons and though builders may not be happy in these subdivisions now is the time to start thinking about replacement projects. Price pressure is expected through the end of the year and builders should start looking at 2015 and 2016 projects to ensure proper product placement and pricing.”

The overall inventory of vacant developed lots (VDL) continues to rise in Q314. The total of 54,309 vacant lots includes all product types, including attached product as well as custom lots. Though VDL inventory has seen minor growth year over year currently 5% from Q3 2013 it has been on an upward trend. Through most lots are in the outlying areas of Pinal County and the SW Valley, reviewing existing positions and timeline for lot deliveries is going to be critical in 2015. Planning lot deliveries and subdivision close-outs in highly competitive areas like the SE Valley will help builders begin to review purchases for lots in 2016 and 2017.  As builders continue to struggle with sales across the valley we have expected to see more finished vacant inventory on the ground this quarter. We actually tracked only 1 percent growth Q3 over Q2. The number of newly built finished vacant units totals 2,550, which is up 20 percent from one year ago.

“As advised previously during the year, we advise builders to approach 2015 with caution,” said Cantor. “With mixed signals comings from buyers within the Phoenix market and no strong indicators for job growth or major mortgage changes it is time to prepare for only moderate growth of 10-15 percent until 2017. Though the lower down payment requirements will probably help some buyers with their purchase, I do not expect this to bring buyers out of the woodwork. With the increase in interest rates now being pushed until end of 2015 to early 2016 and millennials not expected to begin purchasing until 2017 micro awareness of your target buyer and segment is extremely important for builders over coming year. For now, as we wait for the year to close out, expect to see more incentives but very little changes in base pricing.”

For information contact:
Rachel Cantor
480.588.1585
rcantor@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.

Recent Growth Not Sustainable: Limited Lot Supply and Consumer Caution Causing a Slowdown

Posted in Indianapolis Market | Posted on 11-19-2014 | Written by Metrostudy News

  • Annual New Home Starts through 3Q14 down 6% YoY
  • Builders and developers are feeling a squeeze from a lack of quality lots in desirable locations
  • Metrostudy is revising its 2014 forecast downward as the consumer is sitting on the sidelines

November 2014: Through the first nine months of 2014, there have been a total of 3,272 new housing units started (including single-family detached, townhome, and duplex units), a decline of 6.0% compared to the first nine months of 2013. The 1,233 units started in the third quarter of this year represents a decline of 3.1% over the 3q13 starts total.         The annual rate of starts currently stands at 4,232 units, while the annual rate of closings is at 4,144 units.  Both numbers represent a decline when compared to the annual rate of a year ago. Many builders have reported a slowdown in traffic through their communities this year and especially during the late summer and early fall months.

“The middle quarters of 2014 were down 3.4% when compared to the same six-month stretch in 2013,” said Chris Huecksteadt, Regional Director of Metrostudy’s Indianapolis market.          “That being said, the numbers for second and third quarter of 2014 were better than those of any year since 2007 with the exception of last year.  While the slowdown this year is not likely indicative of a major decline in the coming months, it does show that the recent uptick in activity was not sustainable.  Limited supply in quality locations, a cautious consumer, and modest economic growth are the primary reasons for the recent slowdown in new home activity.”

Through the first nine months of 2014, the majority of counties surveyed by Metrostudy saw a decline compared to construction activity in the first half of last year.  Hamilton County still leads the way with approximately 41.1% of all new home construction in the Indianapolis market occurring there. Hendricks County is the new number two (formerly Marion County) representing 14.1% of Indianapolis new home construction over the past year.  One county actually saw a significant increase in starts activity this year: Hancock County, increasing from 201 starts through the first nine months of 2013 to 293 starts in the first nine months of this year.      Nearly all of this increase came from Springs at Deer Crossing in McCordsville, with 75 new home starts in 2014.

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At the bottom of the market, standing new home inventory was a major concern, with a 3.5 month supply in the overall market. As the rate of new home closings increased and builders focused on eliminating the excess inventory, the months of supply indicator declined.  Currently there is just a 1.6 month supply of standing new home inventory in the Indianapolis market, well below the estimated normal level of 2.5 months. This has led some builders to be more aggressive about adding to the levels of inventory, with slight increases in finished and vacant new home inventory in both the second and third quarters of this year.  With the slowdown in the new home market, caution would be prudent regarding any increase in spec inventory.

“With a relatively consistent pace of new home construction (the rate of lot absorption), and a declining level of vacant developed lot inventory, the months of supply for lots in Indianapolis has fallen from a high of nearly 80 months in the second quarter of 2009, to a current level of just 27.5 months,” said Huecksteadt. “ For two straight quarters now the months of supply indicator has been below 30 months.  If Metrostudy excludes those lots in less desirable locations from the survey, the months of supply indicator drops even more sharply. Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to more acquisition and development activity.”

Only Hendricks and Marion Counties exhibited a months of lot supply above the 30-month threshold.  All of the other markets in the Indianapolis survey are below 30 months, with Boone and Hamilton Counties currently at less than 24 months. Hamilton County accounts for more than 40% of all construction activity in the Indianapolis market and currently has a 20.5 month supply of lot inventory available. With the majority of lots in Hamilton County already spoken for, builders are aggressively seeking out opportunities and developers are looking to get lots to the market in order to meet the demand that is likely to occur.  It may be the case that the lack of available supply is contributing somewhat to the slowdown in activity.

Much of the news that impacts the new home market continues to sound positive; job growth continues, the unemployment rate has fallen, foreclosures have moderated, and the resale market continues to improve.    However, the positive news is just not positive enough to sustain the growth in construction activity that was seen over the past two years. In addition, consumer confidence has waned in recent months, causing many to sit on the sidelines and wait things out. There just does not seem to be much urgency among prospective home buyers in the marketplace.

Metrostudy expects that the remainder of 2014 will see little to no improvement in the pace of new home construction and sales, with 2015 not promising much better. The market is not too far off from having supply issues impact the market’s potential for growth in addition to an economy whose temperature can be described as tepid at best.  Given these factors, Metrostudy has revised it’s forecast downward to a range of 4,000 to 4,500 new home starts in 2014.  Next years outlook will be heavily dependent upon growth in the local economy and builders’ and developers’ ability to deliver lots in desirable locations to meet potential new home demand.

For information contact
Chris Huecksteadt
847-651-9080
chueck@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.

New Home Activity Slowing as 2014 Comes to a Close

Posted in Twin Cities Market | Posted on 11-19-2014 | Written by Metrostudy News

  • New Home Starts through 3Q14 are down 7.4% YoY
  • Builders and Developers are feeling a squeeze from a lack of quality lots in desirable locations
  • Homebuyers are sitting on the sidelines; Metrostudy revising its forecast downward for 2014.

November 2014: Metrostudy’s 3Q14 survey of the Twin Cities housing market showed the combination of rapidly rising home prices/land costs, a cautious consumer, and modest economic growth causing slowdown in new home activity. Through the first nine months of 2014, there have been a total of 4,258 new housing units started (including single-family detached, townhome, and duplex units), a decline of 7.4% compared to the first nine months of 2013. The 1,675 units started in the third quarter of this year represents a decline of 7.8% over the 3Q13 starts total.  The annual rate of starts currently stands at 5,593 units, while the annual rate of closings is at 5,425 units.  Both numbers represent a decline when compared to the annual rate of a year ago. Many builders have reported a slowdown in traffic through their communities this year and especially during the late summer and early fall months.

“The second and third quarters of 2013 were very good to homebuilders, with a significant uptick in starts and closings activity when compared to 2012; an increase of 35.0% during that six month span,” said Christ Huecksteadt, Regional Director of Metrostudy’s Twin Cities Region.  “The middle quarters of 2014 were down 9.2% when compared to the same six-month stretch in 2013. That being said, the numbers for second and third quarter of 2014 were better than those of any year since 2007, with the exception of last year.  While the slowdown this year is not likely indicative of a major decline in the coming months, it does show that the recent uptick in activity was not sustainable.”

Through the first nine months of 2014, the majority of counties surveyed by Metrostudy saw a decline compared to construction activity in the first nine months of last year.  Hennepin County still leads the way with approximately 19.6% of all new home construction in the Twin Cities market occurring there. Dakota County is number two, representing 16.0% of Twin Cities new home construction over the past year.      A few outliers saw a significant increase in starts activity this year: Chisago and Isanti counties, increasing from a combined 97 starts through the first nine months of 2013 to 254 starts in the first nine months of this year.

At the bottom of the market, standing new home inventory was a major concern, with more than a 4.0 month supply in the overall market. As the rate of new home closings increased and builders focused on eliminating the excess inventory, the months of supply indicator declined.

Currently there is just a 1.3 month supply of standing new home inventory in the Twin Cities market, well below the estimated normal level of 2.5 months.  This has led some builders to be more aggressive about adding to the levels of inventory, with a 21.6% increase in finished and vacant new home inventory in the third quarter compared to the prior quarter.

With a relatively consistent pace of new home construction (the rate of lot absorption), and a declining level of vacant developed lot inventory, the months of supply for lots in the Twin Cities has fallen from a high of nearly 120 months in the second quarter of 2011, to a current level of 43.7 months. The 3q14 supply indicator rose for the first time since 2011 due to the slowdown in construction activity.  If Metrostudy excludes those lots in less desirable locations from the survey, the months of supply indicator drops even more sharply. Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to more acquisition and development activity.  Through the first nine months of 2014, 2,224 new lots have been delivered with more entitlement activity also occurring.

Many of the most active market areas in the Twin Cities region are currently exhibiting a months of supply nearing equilibrium levels (24 to 30 months).       Hennepin County accounts for nearly 20% of all construction activity in the Twin Cities market and currently has a 21-month supply of lot inventory available. Dakota County, the second most active market in the Twin Cities region, currently has a 25-month supply of lot inventory.  While the overall market shows an oversupply of lots, lots in many of the most desirable locations are becoming more and more scarce, leading to builders to seek land and lot opportunities in those markets (driving up the price of land) as well as some secondary markets.

Much of the news that impacts the new home market continues to sound positive; job growth continues, the unemployment rate has fallen, foreclosures have moderated, and the resale market continues to improve.    However, the positive news is just not positive enough to sustain the growth in construction activity that was seen over the past two years. In addition, consumer confidence has waned in recent months, causing many to sit on the sidelines and wait things out. There just does not seem to be much urgency among prospective home buyers in the marketplace.

Metrostudy expects that the remainder of 2014 will see little to no improvement in the pace of new home construction and sales, with 2015 not promising much better. The market is not too far off from having supply issues impact the market’s potential for growth in addition to an economy whose temperature can be described as lukewarm at best, though improving.

“Given these factors, Metrostudy has revised it’s forecast downward to a range of 5,250 to 5,750 new home starts in 2014,” said Huecksteadt.  “Next year’s outlook will be heavily dependent upon growth in the local economy and builders’ and developers’ ability to deliver lots in desirable locations to meet potential new home demand. In addition, the housing industry desperately needs the consumer to jump back into the game. Modest growth from 5% to 10% is forecast for 2015. Economic growth and, maybe more importantly, consumer attitudes toward home buying, will be crucial for this forecast to materialize.”

For information contact
Chris Huecksteadt
847-651-9080
chueck@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

New Data Confirm the Need to “Drill Down” for the “Real Story”

Posted in National Housing Market | Posted on 11-19-2014 | Written by Brad Hunter

brad h

Taken in total, the housing starts data paint a picture of boring, flat, lackluster performance in 2014.  Dig deeper into the data, however, and you see a much more dynamic picture.  The year is not over yet, but from the data we have collected first-hand, on nearly 100 metropolitan statistical areas in the country, we see markets ranging from a 21% decline in the past four quarters to a 45.8% increase!

Let’s look at a few of the stand-outs.  The data below indicate the percentage change in single-family detached starts from 3Q13 through 3Q14.

In Southwest Florida, the Naples/Ft. Myers market’s single-family starts rose 45.8% in the past year.   Demand is expanding rapidly in both counties in this region (Lee and Collier), predominantly family move-up, but with a rapidly-growing active-adult population.  Not only are single-family homes in demand, but low-rise condos and townhomes are booming as well.  This was a market that got massively overbuilt during the boom and fell extremely hard during the downturn.  Now it is coming up rapidly from a recently-low level.   Existing home prices in Lee County are already back up to early 2004 price levels.  New homes are concentrated in the $300,000-$400,000 range.

Southern California home construction is up 28.4% year-on-year, with the greatest increases occurring in the Inland Empire and in Los Angeles County.  This market had a massive foreclosure problem during the recession, but the quick (non-judicial) system in California allowed for a relatively quick clean-up.  Foreclosures and bank-owned homes are still numerous, but they no longer pose a competitive threat to the builders.

Lot development has picked up sharply in the past two years, with new lot “deliveries” running ahead of the current pace of housing starts.   (A lot “delivery” occurs when a homesite reaches the stage of infrastructure development at which a builder can start construction).

In the next five years, based upon demand, and based upon the data on lot deliveries, the Inland Empire (Riverside and San Bernardino) will see a massive surge of home building activity.

Benefitting from the same non-judicial foreclosure system as Southern California, Northern California is seeing very strong growth.  Single-family housing starts rose 23.4% over the past year, with the Bay Area and Sacramento both seeing increased activity.  The pace of lot deliveries is outrunning starts, which indicates the opening of new communities that will be starting more new homes in 2015.

Other winners over this time period were:

  • Sarasota/Bradenton, up 18.8%
  • San Antonio, up 17.1%
  • Austin, up 16.8%

A few noteworthy “decliners” were:

  • Boise, down 20.7%
  • Suburban Maryland, down 20.6%
  • Phoenix/Tucson, down 19.1%

Metrostudy Names Dennis Handler Regional Director for Southern California

Posted in National Housing Market | Posted on 11-19-2014 | Written by Metrostudy News

Irvine, CA – November 18, 2014   Metrostudy, a Hanley Wood company, announced today the appointment of Dennis Handler as Regional Director for Metrostudy’s Southern California markets.

Handler joins Metrostudy with over 15 years of residential real estate marketing and development and corporate finance for Fortune 500 and international companies.  This extensive experience has provided Dennis with a diversified understanding and knowledge base that has proven to be an invaluable resource for his clients. He most recently was an independent consultant for public and private builders, including D.R. Horton, Williams Homes and K. Hovnanian.  Additionally, he has provided extensive due diligence and market analysis for public and private residential developers, focusing on land and fee development budgets, entitlements and permits, strategic marketing, competitive analysis, and project management for projects located throughout California and Saudi Arabia.

“Dennis is a highly experienced professional and he makes a strong addition to the Metrostudy team,” said Mike Castleman, Metrostudy’s Western U.S. Senior Vice President. Handler will oversee all operations for Metrostudy’s Southern California market, including consulting with builders, developers and financial institutions regarding housing and economic market conditions.

For information contact
Danielle Fiore
(813) 361-5592
dfiore@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; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Chicago Needs the Consumer to Get Back in the Game

Posted in Chicago Market | Posted on 11-14-2014 | Written by Metrostudy News

  • The annual new start rate as of 3Q14 is up 12.4% YoY, and at the highest level since 1Q09
  • Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to elevated levels of acquisition and development activity
  • We are not seeing the needed levels of urgency among homebuyers, many of whom are sitting on the sidelines.  Metrostudy is revising its 2014 forecast downwards.

November 2014: Metrostudy’s 3Q14 survey of the Chicagoland market shows that the rate of new home permit activity has continued to slow through August and September of this year. In June of this year the annual rate of single-family permits issued peaked at 634,000 units. Since that time, the annual rate has declined, as both July and August saw a dip compared to the prior year. The current annual rate of single-family permits stands at 627,000, slightly above the 2013 tally of 617,000 units, but down slightly (-0.6%) from the annual rate one year ago.  Even as economic growth continues, buyers seem hesitant to jump into the new home market with both feet.

“Including single-family detached units, townhouse units and duplex units in the twelve- county Chicagoland region, there were a total of 5,401 new units started in the twelve month period ending with the third quarter of 2014, an increase of 12.3% compared against the previous year,” said Chris Huecksteadt, Regional Director of Metrostudy’s Chicagoland region. “This is the highest annual rate of new home construction since 1Q09.  The annual rate of closings also increased in the third quarter, to 5,190 units. This represents a 12.1% increase in the number of annual closings compared to the prior year. The double digit percentage increases represent the largest rate of growth in annual starts and closings since the early 2000’s.”

chi3q

 

The 1,736 units started in the third quarter of this year represent an increase of 11.3% over the 3Q13 starts total. This number is more than double the first quarter tally, and nearly 200 units greater than that in the second quarter. The number of homes closed in the third quarter of this year also saw a significant improvement, up 8.6% compared to the 3q13 total.  There were 1,620 new homes closed in the third quarter of 2014, compared to 1,492 units closed in the third quarter of 2013. With the job growth experienced over the past eighteen months, Metrostudy expects growth in both starts and closings to moderate for the remainder of 2014.  Reported slowdowns in buyer traffic over the past several months make the increased rates of construction appear unsustainable.

Nearly two-thirds of all new home starts in the Chicagoland market occurred in four counties: Cook, Kane, and Will in Illinois and Lake County in Indiana. Lake County, Indiana, after leading the region through the first quarter, fell to third following the third quarter.  Throughout the collar counties, a significant increase in construction activity occurred in the first nine months of this year when compared to the first nine months of 2013. The outlying counties within the greater Chicagoland area saw an uptick in activity as well. Grundy, DeKalb, and Winnebago counties saw an increase of 110% year to date 2014 over 2013 (177 new home starts in 2014 compared to 84 starts in 2013).

Finished and vacant inventory had steadily fallen in the overall market, which led to the need for new home construction as demand continues to grow. The supply of finished and vacant inventory rose slightly to 2.6 months for single- family detached and attached homes in the third quarter.  “With the continued increases in construction activity, and the slowdown of traffic reported by builders, it is not surprising that inventory has risen over the past few quarters,” said Huecksteadt. “Metrostudy expects the rate of construction to slow in the fourth quarter as builders attempt to reign in inventory levels heading into 2015.     In fact, don’t be surprised if incentives are offered to buyers by builders in an attempt to absorb the standing new home inventory in the market place.”

With a relatively consistent pace of new home construction (the rate of lot absorption), and a declining level of vacant developed lot inventory, the months of supply for lots in the Chicago market has fallen from a high of nearly 250 months in the third quarter of 2011, to a current level of 104.9 months. Increases in construction activity, even in the outlying areas of the market, have continued to drive the months of supply indicator downward. If Metrostudy excludes those lots in less desirable locations from the survey, the months of supply indicator drops even more sharply.  Builders and developers are both feeling the squeeze from a lack of quality lots in desirable locations, leading to elevated levels of acquisition and development activity.

Much of the news that impacts the new home market continues to sound positive; job growth continues, the unemployment rate has fallen, foreclosures have moderated, and the resale market, though slowing, is still considered healthy.       However, the positive news is just not positive enough to sustain the growth in construction activity that was seen over the past two years.

In addition, consumer confidence has waned in recent months, causing many to sit on the sidelines and wait things out. There just does not seem to be much urgency among prospective homebuyers in the marketplace.  Metrostudy expects that the remainder of 2014 will see little to no improvement in the pace of new home construction and sales, with 2015 expected to be flat to modest in growth. The market is not too far off from having supply issues impact the market’s potential for growth in addition to an economy whose temperature can be described as lukewarm at best (though improving).

Given these factors, Metrostudy has revised its forecast downward to a range of 5,250 to 5,750 new home starts for 2014.  Next year’s outlook will be heavily dependent upon growth in the local economy and builder’s and developer’s ability to deliver lots in desirable locations to meet potential new home demand. In addition, the housing industry desperately needs the consumer to jump back into the game. Modest growth from 5% to 10% is forecast for 2015. Economic growth and, maybe more importantly, consumer attitudes toward home buying, will be crucial for this forecast to materialize.

For information contact
Chris Huecksteadt
847-651-9080
chueck@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.

Metrostudy Releases Q3 2014 Residential Remodeling Index (RRI)

Posted in National Housing Market | Posted on 11-13-2014 | Written by Brad Hunter

Index Posts 3.3% Year-Over-Year Gain, Forecast For a 2015 Firming Remains Unchanged

WASHINGTON, DC (November 13, 2014) — Metrostudy, a Hanley Wood company, announced today the release of its Third Quarter 2014 Residential Remodeling Index (RRI) detailing activity in the remodeling and replacement industry.

On a seasonally adjusted basis, the index posted a gain of 3.3% year-over-year in the third quarter. While the rate of growth was slower than the prior quarter, the RRI has now posted ten consecutive quarters with positive year-over-year gains since the market bottomed at the end of 2011 and is on track to reach full recovery (a reading of 100.0 or more) in third quarter 2015. By fourth quarter 2015, the index is expected to surpass the previous peak recorded in early 2007.

The seasonally adjusted third quarter national composite of the RRI registered a score of 96.0, which was 0.8% higher than the revised second quarter result of 95.3. The 0.8% quarter-to-quarter increase follows second quarter’s 0.7% gain.

“The remodeling market thus far in 2014 is mimicking the muddling along of the overall housing market. The 2014 housing market has seen its share of first-time buyers hit a 27-year low, while the share of renter occupied housing reached its highest level on record in second quarter. The inability of younger households to purchase their first homes and begin remodeling projects is leaving a void in the overall measure of activity,” said Brad Hunter, Chief Economist of Metrostudy. “Yet, remodeling activity is being buoyed by growing families and baby boomers, the demographics with deeper pockets, and contractor sentiment is high for these groups. Despite the moderation seen in current 2014 growth, our forecast for the remodeling market to reach full recovery in third quarter 2015 has not changed, mainly due to continually positive job and economic reports that point to a firming in housing fundamentals over the near term.  Wage growth, which remains stagnant, will be key to watch heading into next year.”

The Metrostudy Residential Remodeling Index is a quarterly measure of the level of remodeling activity in 381 metropolitan statistical areas (MSA) in the U.S., with the national composite reflecting the national level of activity. “Activity” includes home improvement and replacement projects, but does not include maintenance or projects of less than $1000. The seasonally adjusted index shows the relative level of activity in the geography specified (MSA or national composite) compared to 2007 (the baseline year). A number above 100 indicates a level of remodeling activity higher than the level of activity at the beginning of 2007, which was the peak of remodeling activity in the prior decade.

The index is produced through a statistical model that leverages detailed data on remodeling activity, including household level remodeling permits, and consumer-reported remodeling and replacement projects. Quarterly historical results for the national composite and for each of the 381 Metropolitan Statistical Areas in the U.S. are available back to 2004. In addition, Metrostudy also produces annual estimates of project counts and expenditures as well as forecasts of the quarterly RRI and annual projects and expenditures.

Metrostudy produces the RRI to provide the industry visibility into local market remodeling activity, forecasted future activity, and potential demand.  According to the company’s third quarter report, 359 out of 381 Metropolitan Statistical Areas should see year-over-year growth in remodeling and replacement projects in 2014, with average growth of 4%.

Media representatives may request a full copy of the report by contacting Danielle Fiore at dfiore@metrostudy.com.

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; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Market Strong into 2015 Despite Rising Affordability Concerns

Posted in Dallas - Ft. Worth Market | Posted on 11-12-2014 | Written by Metrostudy News

  • Annual New Home Starts Rate is up 8% from 3Q13; 69% up from 2011’s lows
  • We saw starts slow earlier this year as affordability concerns drove buyers into existing – not new – homes
  • Starts prices above $250k are now above 2006 market peak levels; starts under $200k are still declining

November 2014: Metrostudy’s 3Q14 survey of the Dallas-Fort Worth housing market shows the annual new home starts pace (single family detached and townhouse) in the region rose to 23,000, 8% higher than 3Q13 and 69% above the low in 2011. The growth in starts slowed during the second and third quarters due to increased difficulty delivering the most affordable price points in the most desired submarkets by homebuyers. Price increases over the past two and a half years have affected affordability and have forced more buyers to purchase existing homes. The existing home market has gained 12% in market share during this time, primarily at the affordable prices. With the higher lot prices for the newest generation of lots and increased costs decreasing affordability, starts are likely to continue to flatten over the next year.

“Starts during the third quarter were up 7% compared to the prior year, driven by a significant jump in starts for homes price between $250,000 and $750,000,” said David Brown, Regional Director of Metrostudy’s Dallas-Fort Worth region. “The large gain in starts in this price range barely overcame the 21% decline in starts of homes priced under $200,000 during the quarter. Starts in the $250,000 to $750,000 price range are now above the starts pace at the peak of the market in 2006. It has to make you question how much longer the move up price ranges can continue to experience strong year over year gains. With the under $200,000 price range still accounting for 25% of the new home demand, but declining in activity, it is likely the growth in starts will continue to flatten in 2015.”

dallas 3q

New home closings jumped only 12% in the third quarter compared to the prior year as completions jumped 14% during the quarter. Builders continue to get homes completed, but once completed they are closing. New home completions exceeded closings by only 500 homes during the last year. Completions only exceed closings by 100 homes during the third quarter even though builders completed more homes during the third quarter than any time since 2008. Annual closings rose to 21,500 homes during the third quarter, 13% higher than a year earlier. The annual closings are now 49% higher than the bottom of the market that occurred in the third quarter of 2011.

The top four submarkets (North Fort Worth, Frisco, McKinney and Denton County) accounted for 34% of the starts in the Dallas-Fort Worth region. The top ten submarkets accounted for approximately 48% of all new home starts in the region, but has lost market share in 2014 due to rising prices. Nine of the top ten submarkets are located in the northern half of the Metroplex.  Southwest Fort Worth is the only southern sector submarket in the top ten.

New home inventory rose 2% during the third quarter due to the increased starts and extended construction cycle time. Since homes are closing as soon as they are completed, the ratio of finished vacant inventory to total inventory continues to remain at near a record low at 24%. The majority of the inventory increase was in homes under construction, as closings only lagged new completions by 100 homes during quarter. Total SFD & TH inventory ended the quarter at approximately 12,300 homes. The inventory represents a 6.9-month supply, flat compared to the second quarter. It is typical for the months of supply to be above 6-months when a market is expanding because starts will increase in response to stronger demand. It takes anywhere from 3 to 12 months to finish and close a home.

Even though starts increased 7% during the third quarter, finished inventory only grew 4%. Finished inventory, however, is 21% above the record low level from a year earlier. Although finished inventory is higher this year, it is still a very restricted at a 1.6-month supply based on historical closings. If closings grow as expected in the coming quarters, the supply is even more restricted than is indicated using the historical closings. Shifts in the supply of finished inventory have historically been an indicator of changes in future starts. The current inventory level continues to indicate a very strong housing market. Metrostudy will be monitoring the trends in finished inventory for signs of any softening in the market dynamics.

“All price ranges have below a 2-month supply of finished vacant inventory, again indicating a very supply constrained market, said Brown. “The lowest months of supply is for homes priced under $350,000 and over $750,000. The finished supply is most restricted in the luxury price range due to the extended construction cycle. The ratio of finished vacant inventory is the lowest for homes priced over $500,000. The ratio of finished inventory is the closest to a normal range of 30% to 35% for homes priced under $200,000.”

New development activity is concentrated in the northern suburbs of Dallas and Fort Worth where supply is the most restricted. There are currently approximately 12,000 lots under construction in DFW, down approximately 8% from the second quarter and down 20% from the first quarter. Therefore, lot deliveries are likely to decline in the fourth quarter further restricting lot supply.

Existing home sales slipped 1% during the first nine months of 2014 because the severely constrained supply. New listings grew slightly in during the third quarter, which lead to an increase in pending sales during the quarter and more significant jump in sales during September. If new listings can continue to grow in the coming months, then sales could continue to increase. However, if supply begins to fall again during the fourth quarter, sales are likely to return to a slight decline. The appreciation rate has slowed somewhat as affordability issues have appeared in several submarkets. Overall, the outlook for the housing market for the remainder of 2014 and heading into 2015 remains strong despite higher prices affecting affordability.

For information contact
David Brown
214-891-5602
davidb@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.