A Sluggish Finish for 2014: Housing Starts

Posted in National Housing Market | Posted on 12-16-2014 | Written by Brad Hunter

 

brad hHousing starts fell 1.6% from October and 7.0% from November 2013 with a decrease in single-family starts of 5.4%, according to today’s release from the Census.

There was no evidence of a strong pickup in home construction in the final months of 2014. According to the Census Bureau data released this morning, housing starts in November were at a seasonally adjusted annual rate of 1,028,000. According to the Bureau, this is 1.6 percent (±8.1%) below the revised October estimate of 1,045,000 and is 7.0 percent (±10.2%) below the November 2013 rate of 1,105,000.

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The Rosy Affordability Picture Cannot Last Forever

Posted in Houston Market | Posted on 12-12-2014 | Written by Metrostudy News

 

  • Annual new home starts are up 9.4% YoY; only lot supply constraints are stopping builders from ramping up more quickly
  • Housing Starts are at their strongest since 3Q08
  • Builder bottlenecks are causing strong appreciation in home values; with rental rates rising buyers have little choice but to pay higher prices

December 2014:  The Houston new home market continued to surge in the third quarter, with builders starting construction on 8,531 new homes, about double the annual increase from last quarter. Representing a year-over-year gain of 9%, Houston hasn’t seen this many new homes since the third quarter of 2007. On an annualized basis, starts stand at 29,905, 8% above 3Q13, and the strongest rolling four quarters since 3Q08. The growth in the pace of starts continues to follow a measured linear trajectory as lot supply constraints have prevented Houston builders from ramping up construction more quickly.

“While annual starts have outpaced annual closings since 2012, closings have increased steadily over the last thirteen quarters,” said Scott Davis, Director of Metrostudy’s Houston market. “In the third quarter, area builders closed 7,625 new homes, bringing the annualized total to 27,647. This level of activity represents a 9.2% increase from prior quarter, and a 9.4% gain from a year ago. During the expansion phase of a housing recovery we expect to continue to see closings lag behind starts activity given the timeline of home construction and sales. The current annualized rate of new home closings is the largest since the first quarter of 2009 when builders were still liquidating their inventory as quickly as possible. Needless to say, the sales occurring today are of a much healthier nature.”

Metrostudy’s third quarter survey reflects 16.931 homes currently under construction; over 2,200 more than a year ago, and which equates to 7.3 months of supply. Conversely, the supply of homes sitting finished and vacant has increased 8% from a year ago to 3,453 units, although this level has held steady for the last couple quarters. Interestingly, this is a mere 30% of the number of finished vacant units available in the second quarter of 2007, the height of speculative building.

The number of finished vacant homes in the market remains at near historic lows as builders see their speculative homes purchased before reaching completion. The relative supply of finished vacant homes in the market is a mere 1.5 months, well below the 10 year average of 2.5 months. While Finished Vacant and Model inventory continue to shrink, the ramp up in Under Construction inventory was sufficient to offset the decline as months supply increased to 7.3 months for total housing inventory.

Median New Home Prices

hou sd 3q

“As we continue through 2014, several significant trends stand out in significance for the Houston housing market,” said Davis.  “These include the continued job growth thanks to strong economic fundamentals, very low resale inventory, and high affordability resulting from continued low mortgage rates. All of these factors have been pushing homebuyers toward new housing, invigorating demand and pushing prices upward. Also contributing to higher prices on the supply side is the increase in input costs such as land, labor, and materials. Recently, builders have been able to pass along these increases to homebuyers as persistently low interest rates for 30-year mortgages have contributed to high levels of affordability. But between rising prices and an eventual increase in mortgage rates, the rosy affordability picture cannot last forever. A general rule of thumb to remember is that for every one percent that interest rates rise, the size of a loan available to homebuyers decreases by around ten percent. At some point, even a robust housing market like Houston will have to deal with the eventuality of interest rate pressure and high prices.”

Job growth is one of the single most important drivers of home demand, and Houston’s pace of job growth is one of the highest in the nation. While not as strong as last year, the general consensus seems to be that job growth in the Houston MSA will continue at a healthy pace throughout the rest of 2014.

Another important driver for new home demand is the extremely tight inventory of resale homes available on the market. Historically low resale inventory levels seem to be pushing would-be resale buyers into the new home market. Buyer traffic and net sales reported in Metrostudy’s monthly survey over the last 12 months have been consistent with the 12 months prior.

Tight supplies of available housing historically leads to home price appreciation, and prices in housing are rising quickly in both new and resale homes. On top of this, builders are coping with an overall increase in the real cost of building a new home in the market. Builders currently face fierce competition for a limited number of available lots to build on in suitable locations. In addition, builders are paying higher costs for materials and facing shortages in labor. These factors have contributed to a bottleneck which has limited growth in starts and has extended delivery times. Increased land and input costs are subsequently being passed down to consumers, as tight inventories have increased builders’ bargaining power and allowed them to raise prices. Consumers have little choice but to pay these higher prices or continue to rent at ever increasing rates, as inventories in both the new home and resale markets are quite thin. The result of all these factors is strong appreciation in home values, which Houston has already been observing as median closing prices for resales in Houston are up over 5% since last year and new sales are up 4.6%.          Other factors contributing to the increase in median home prices are fewer distressed sales and higher volumes of sales in the move-up market.

For information contact:
Scott Davis 713-622-9909 x132
sdavis@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.

Despite Strong Growth, Excess Lot Supply Keeps Prices Stable

Posted in The Triad Market | Posted on 12-12-2014 | Written by Metrostudy News

  • The region is seeing the strongest growth in years – YTD Housing Starts are up 15.6% over 2013 levels
  • Oversupply of lots in many locations is allowing builders to keep costs in line with market demand
  • Townhomes are showing increased strength in the Triad market, with 3Q14 construction up 26.7% over 3Q13

December 2014: Metrostudy’s 3Q14 survey of the Triad’s housing market shows that despite continuing signs of strength, the region needs continued strong job growth to reduce the excess supply of housing.  Through 3Q14, Annual Starts (the sum of the past four quarters) of 2,323 were observed in the Triad, an increase of 14.4% from 3Q13. The 688 quarterly starts in 3Q14 was a 2.2% increase over 3Q13. The 587 quarterly closings in 3Q14 was a 11.6% decrease from the 526 homes closed in 3Q13.

“Looking at a year-to-date perspective, the Triad is up 15.6% in starts compared to 2013, and up nearly 20% in closings,” said Jay Colvin, Director of Metrostudy’s Triad region. “The strong upward trend so far this year indicates that the Triad will post the strongest growth it has seen in many years.”

Total inventory, which includes model homes, finished vacant homes (no visible sign of occupancy), and homes under construction, totaled 1,735 units in 3Q14. Based on the closing pace over the past 12 months, the Triad now has a 9.5 months-of-supply of new homes.The stable finished vacant home inventory is an indicator that the growth in construction activity over the past year has not been artificial.

The 10,957 lots on the ground in the Triad in 3Q14 is 10% less than the number of lots on the ground in 3Q13. This represents a 56.5 months-of-supply at the current start rate. Even though this figure is well above the range that Metrostudy considers normal for lot supplies, there are shortages of lots in the highest demand locations, and that has driven limited new lot production. 1,112 lots were delivered to the market over the past 4 quarters. Those lots have been added to currently active neighborhoods which have maintained or increased sales over the past few quarters.

“The oversupply of lots, many of which are bank owned or in the default process, has aided in resetting the price for lots, helping builders offer homes priced to reflect market demand,” said Colvin. “As higher activity neighborhoods near build out, existing lots offer a cost effective replacement alternative to new lot production, and allow builders to keep cost in line with market demand.”

Townhomes – following national trends – are showing increased gains in the Triad new home market. Construction on 474 townhomes started over the four quarters ending 3Q14, a 26.7% increase from 3Q13. 430 townhomes were closed on over the previous four quarters, which was a 25.7% increase from the 3Q13 figure. 114 townhomes were closed on in 3Q14, 28% more than 3Q13.

The 2,363 vacant developed lots available for townhome product, is down 10.7% from 3Q13. At the current pace of starts, the total number of lots represents a 59.8 months-of-supply. 191 new townhome lots were developed over the previous 12 months, a sign that well positioned townhome communities are seeing sustained demand.

Lot supplies are still high, but as with the overall trend, the most in-demand submarkets are seeing shorter supplies and the gains in lot development are expected to continue.  The job gains that the region has experienced so far in 2014 are very important to the local housing industry. However, for a sustainable recovery, job growth needs to stay at this level and avoid the choppiness that the market has experienced over the past several quarters. In order for the excess housing supply to be reduced, the region will need to experience greater job growth rates, as well as increased rates of population growth.

For information contact:
Jay Colvin – 919- 314-0420
jcolvin@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.

Fading Lot Supplies and Affordability May Slow Nashville’s Overall Strong Housing Market

Posted in Nashville Market | Posted on 12-11-2014 | Written by Metrostudy News

  • 3Q14 New Home Starts down 1% YoY, although they are up 13% from 2Q14
  • We continue to see a decline in the number of Vacant Developed Lots, which are down 9% YoY and 22% since 3Q12

December 2014:  Metrostudy’s 3Q14 field research of the Nashville housing market showed 1,838 quarterly construction starts, down 1% YoY but up 13% from the prior quarter. The 12 months ending in September 2014 saw 6,163 new home starts in the 8 county region, up 11% year over year from 3Q13.

The Nashville area recorded 1,645 New Home Closings in 3Q14, up 4% year over year from 3Q13, and up 18% from the previous quarter when closings reached 1,390. The trailing 12 months of activity in the area resulted in 5,626 closings in the area through 3Q14, up 12% year over year from when annual closings reached 5,009 units in the 12 months ending in 3Q13.

nash ej 3q

The 6,163 new homes built over the past 12 months also absorbed an equal number of finished lots (VDL’s), which are already in short supply in certain submarkets such as Williamson County. Lot inventory has declined by 22% from two years ago and by 9% year over year. Total VDL inventory for the region now stands at 11,400 which equates to a 22 month supply but areas such as Williamson County are down to a 14 month supply, which is considered a severe shortage (2 years’ worth of lot supply is considered about normal).

“With land and lot prices rising, higher material costs and increasing labor constraints, it appears that home prices will continue to rise perhaps into all of 2015,”  said Eugene James, director for Metrostudy, a local housing research company. “We expect to see new construction activity to increase in areas that were not seeing much activity as little as a year ago, while the core regions may experience some slowing in part, because of much higher home prices and a shortage of finished buildable lots,” said James.

For information contact:
Eugene James – 404.510.1080 cell
ejames@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.

Market Strength Continues but Affordability Squeeze shows Recalibration is Needed

Posted in Denver - Colorado Springs Market | Posted on 12-11-2014 | Written by Metrostudy News

  • Denver’s 3Q14 Home Starts are up 14% over 3Q13; the highest number of quarterly starts since 3Q07
  • Pricing Squeeze Continues on First Time and Entry Level buyers as only 17% of new homes are priced below $300k, down from 40% in 2012
  • Closings rate is slowing down showing that builders should be cautious moving into 2015 and keep expectations realistic.

December 2014:  Metrostudy’s 3Q14 quarterly lot-by-lot field survey of the Denver housing market shows that 2,215 homes were started in the quarter, up 14% from 3Q13. This is the highest number of starts in any quarter since 3Q07 and the first time builders have started over 2,200 homes in consecutive quarters since 2007. As a result of strong buyer demand and healthy builder sentiment, annual starts have ascended to 7,558, a 14% increase from 3Q13 and the highest level since 2008. Builders also closed 1,742 units in the third quarter, an increase of 3% from 3Q13.

Annual closings in the third quarter increased 4% to 6,455 home closings compared to 3Q13. Clearly starts continue to outpace closings, a sign at first glance that the market is growing. However, looking closer at the trend over the last several years, home starts and closings continue to grow, but at a declining rate. Builders have started nearly 6,100 homes year-to-date, up 16%, but have closed only 4,800 homes which is the identical number of closings YTD in 2013. Reasons for the slowdown in closings could include price increases, shortages in trade labor, and tight inventory. No matter the reason, builders should be cautious moving into spring 2015 and establish realistic expectations.

“Strong demand from move-up buyers combined with rising costs have placed more emphasis on higher priced product over the course of the last several years,” said John Covert, Director of Metrostudy’s Denver region.  “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. For many 1st time or entry level buyers looking to buy single family detached homes, the market has few options available as they’ve either been priced out of the market or can’t find housing in the right locations, thus the need to recalibrate. Only 17% of all single family home starts in the last year were priced below $300,000 compared to 29% in 2013 and 40% in 2012.”

Denver Starts by Price

den jc 3q

After five years of declines, vacant developed lot (VDL) inventory in the Denver Market has leveled off in 2014 with 10,565 vacant lots for a 21 month supply. Lot count is essentially unchanged from last quarter, up 1%, and also up only 1% from a year ago. “With home starts up 14% over the year, this can only mean that lot deliveries have accelerated in 2014,” said Covert. “Up over 100% from a year ago, lot deliveries have finally outpaced home starts for the first time since 2007. Normally this would provide some relief for builders, but with lot supplies still tight in prime submarkets, and most of the new lots already controlled by larger public builders, Metrostudy expects supplies to remain tight through 2015. In active projects, lots are virtually nonexistent for homes priced under $250,000 and months of supply hovers between 12 and 18 months for the rest of the segments up to $500,000.”

At the end of September there were 5,740 new homes in inventory, up 23% from a year ago and up 9% compared to last quarter. Of that total, 3,988 are single family detached units that are either under construction, finished & vacant or model homes (total inventory). Inventory levels for SFD are now at 9.1 months compared to 7.7 months a year ago – above the 7.0-8.0 months considered to be equilibrium for SFD total housing inventory and the highest level since Metrostudy began tracking the market in 2001. Again, much of this increase is to meet demand in the market, but with inventory high, and prices high, builders should pay close attention to buyer sentiment moving into 2015. There are another 1,752 attached (condo, townhome, duplex) units in total inventory, up from 1,488 units in 3Q13, an increase of 18%. Most of the increase has come by way of paired or townhome product, which represents over 1,107 of the attached units in inventory. The supply of attached inventory has spiked in the last couple of quarters and is now at 17 months. While inventory is up over the year, closings for attached product continue to decline, down 6%, thus the rise in total inventory months of supply. Our 4th quarter survey will reveal how much of the inventory builders were able to close.

As perhaps housing’s best indicator of market health and equilibrium between 1.5-2.0 months, finished vacant inventory in Denver appears tight. For the single family detached market there are now 647 finished vacant units on the ground, up 58% from a year ago as builders continue to play catch-up with strong demand the last two years. However, closings are flat, thus months of supply of finished vacant inventory has increased from 1.0 month a year ago to 1.5 months in 3Q14. Still low by historical norms and at the lower end of equilibrium, finished vacant inventory has experienced a sharp increase that should be monitored closely over the next few months. The number of finished vacant homes has more than doubled in several price bands over the year, particularly in the $400,000-$499,999 segment.

Have builders finally caught up with demand by putting enough inventory on the ground that will be absorbed by year’s end? Or, have the market increases we’ve experienced the last couple of years began to slow because of rising prices in which case builders may be left with some excess inventory? It’s hard to ignore Denver’s robust economy, strong buyer traffic and increased sales activity which all point to a consumer that is still engaged. However, the pressures on the industry in 2014 such as high land prices and rising development fees, tight lot supplies, rising construction costs, and tight labor markets will likely be factors in 2015, in which case builders should approach the new year with realistic expectations.

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.

Triangle Housing Demand Growing, Supply Constraints Holding Back Gains

Posted in Raleigh - Durham Market | Posted on 12-11-2014 | Written by Metrostudy News

  • Metrostudy’s 3Q14 survey of the housing market shows quarterly new home starts down 3.9% from 3Q13 levels. Year to date, starts are equal to 2013.
  • Closings continue to trend higher, up 3% from 3Q13 levels.
  • New Construction activity continues to be biased towards higher priced homes
  • A Shortage of Lots and Developable Land inventory has been the biggest hindrances to near term grown in the Triangle

December 2014:  Metrostudy’s 3Q14 survey of the Triangle’s housing market shows a market that continues to face crosswinds, even as demand is getting stronger.  Our survey shows that for the quarter ending September 2014, the Triangle started construction on 2,432 new homes, down 3.9% from 3Q13. Quarterly Closings – previously unoccupied new homes that now are occupied – totaled 2,393 units, a 3% increase from 3Q13.  The 8,690 annual starts surveyed through the end of 3Q14 was slightly higher than the number of homes started in the same period a year ago, 8,685. The annual closings figure of 8,697 was 7.7% more than the four quarters ended 3Q13.  Following the overall trend, year-to-date starts are essentially the same as last year through the first three quarters of the year. Closings continue to show gains, up 7.9% year-to-date.

“Triangle new home construction activity continues to show a bias towards higher priced homes,” said Jay Colvin, Director of Metrostudy’s Raleigh-Durham region. “While new homes with base prices of $200,000-$299,999 are capturing 35% of all new home demand, homes priced between $400,000 and $499,000 showed the highest percentage gain in closings with a 32% increase from the number of closings over the four quarter period ending in 3Q13.  Construction on homes priced below $200,000 continues to shed market share. Construction volume in this price range has decreased 20% from 3Q13 – closing pace has only decreased 9%.”

Total inventory – models, finished vacant unoccupied new homes, and new homes under construction – equaled 4,970 units in 3Q14, slightly above the amount recorded in 3Q13 of 4,959. Under Construction inventory now stands at 3,250 homes (4.5-months’ supply), which is 5.2% lower than 3Q13. Finished Vacant inventory now stands at 1,495 homes (2.1 months’ supply). At current closing pace Total Inventory (Models, Finished Vacant, and Under Construction homes) represents a 6.9- months’ supply of homes, down from the 7.4 months’ supply seen in 3Q13.

The 19,666 vacant developed lots in the Triangle in 3Q14 represent a decrease of 1,665 lots from the 21,331 lots surveyed in 3Q13. At the current absorption rate, these lots represent a 27.2- months’ supply – the lowest since 1Q08. Metrostudy considers 18-24 months to be normal, as on average that is the amount of time it takes to entitle and deliver new home lots to the market. Not all lots share equal demand. In Triangle submarkets with the highest demand, lot supplies are well below equilibrium, and in some municipalities the entitlement timeline has been significantly longer than the 18-24 month average.

Over the last 4 quarters 7,025 new lots were developed in the Triangle, which 49.7% higher than 3Q13. There were 2,498 lots delivered to the market in 3Q14, which is more than double the number of lots added to the market in 3Q13. The current pace of lot deliveries is 81% of the absorption rate (annual starts). This trend may be nearing an end as lot development activity has begun to increase at a higher pace. In 2Q and 3Q the average lot delivery has been just over 2,200 lots per quarter. Before 2009, the market averaged over 3,000 new lots per quarter.

Townhomes currently make up 20.5% of total Triangle new home construction, up from the 19.7% market share in 3Q13, but remain well below the 21.2% historical average, and significantly below the pre-recession average share of 22%.  Triangle townhome builders started construction on 474 townhomes (THs) in 3Q14, 8.7% more than 3Q13. Annual starts of 1,785 homes were 4.5% greater than the 1,708 observed in 3Q13.

“Lot and developable land inventories are, and have been, the biggest hindrances to increased housing production in the Triangle in the near term,” said Colvin. “Land prices have been moving higher and higher as the market has recovered and builders and developers have focused on the core markets, but the result has been a growing inventory of land in the entitlement process, with the expectation of lot development growth throughout 2015.”

Some of this has already begun to take shape. In spite of weather delays, which slowed lot production in the first few months of the year, lot deliveries have resumed their upward trajectory. For the first time since 2008, the Triangle averaged over 1,800 lot deliveries per quarter so far in 2014. There are still fewer new lots being developed than the number of new homes that are being built, and lot shortages are persistent in the highest demand submarkets, but there is positive momentum and this is a positive sign for the housing market. Positive momentum aside, lot development will need to continue to grow to at least the pace of demand for greater overall volumes to increase over the next 12-18 months.

Metrostudy’s belief is that both volume and pricing growth will be moderate through 2015, as the new home market begins to deliver enough lots to actually growth volumes instead of simply replacing currently active projects that are running out of inventory quickly.  The market has started to act and react to market fluctuations in a more traditional fashion, which is helping new projects to be assessed through a pragmatic lens, and secondary submarkets are being seen for potential rewards. Our expectation is that this will allow greater production of more moderately priced homes, helping to drive greater deal flow in both the existing and new home markets.

For information contact:
Jay Colvin – 919- 314-0420
jcolvin@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.

Rising Prices Squeezing Buyers into Resale Market; Builders Must Replace Lots at Higher Prices

Posted in Jacksonville Market | Posted on 12-10-2014 | Written by Metrostudy News

  • 3Q14 saw new home starts down 5.3% YoY, even as the annual starts rate is up 6.5%
  • Rising new home prices are pushing buyers into the resale market
  • Builders are working through lot inventories bought during the recession; replacement lots will be more expensive, adding to pricing pressure

December 2014: Metrostudy’s 3Q14 survey of the Jacksonville Market  - Clay, Duval, Nassau, and St. Johns counties – shows 1,383 single-family units were started in the quarter, down 5.3% from 3Q13.

The annual starts rate compared to last year increased by 6.5% to 5,429 annual starts.  Single-family quarterly closings totaled 1,429 units which is 15.9% higher than the same quarter last year. The annual closings rate (past 4 quarters) totaled 5,452 units, 24.6% above the rate of 4,374 units per year recorded a year ago.

Jacksonville’s quarterly housing starts in the third quarter of 2014 grew from the second quarter, but were slightly below last year’s third quarter. Move-ins grew from the second quarter and were above last year’s third quarter. Activity should continue on an uneven, slight growth path for the next few quarters.

Annual Starts by Price Range

 ac jax 3q

The table below indicates the current distribution of annual starts and closings by price range.

Price Range                 Starts         Closings

< $149,000…………………. 282………… 303

$150,000 to $199,999……1,047 ……. 1,060

$200,000 to $249,999……1,483 ……. 1,529

$250,000 to $299,999……1,120 ……. 1,186

$300,000 to $349,999……. 647………… 641

$350,000 to $399,999……. 339………… 312

>$400,000 …………………. 470………… 413

“Closings and starts have been about the same over the past year, meaning we have not seen a significant increase in housing inventory in any price range,” said Anthony Crocco, Director of Metrostudy’s Jacksonville region.  “Total single-family inventory, comprised of units under construction, finished vacant units and models, equaled 2,770 units on the ground at the end of the third quarter, 6.1 months of supply. Overall, housing inventories decreased by 0.8% compared to last year.”

The market’s under construction inventory declined by 231 units to 1,687, or 12.0% compared to last year. Finished vacant inventory increased by 27.1% from 672 units last year to 854 this year.  This quarter, 966 lots were delivered to the Jacksonville market, a 19.4% increase from the same quarter last year. Vacant developed lot inventory stands at 15,223 lots, a decrease of 9.5% compared to 16,814 lots last year. Based upon the annual starts rate, this lot inventory represents 33.6 months of supply, a decrease of 5.9 months from last year.

Overall, there are no issues with housing or vacant lot inventories. Finished home supply is down from last quarter, and the under construction inventory also declined.  Lot inventories are nearing equilibrium for the Jacksonville market, although lots are needed in most of the top selling areas. Lot delivery rates are increasing and should continue to grow for the next few quarters, at least.  The Jacksonville area’s new housing industry is healthy, in spite of slower growth. New housing starts have flattened as inventories are near equilibrium and pricing growth over the past 18 months slowed sales paces. Still, move-in paces remain strong and builder profit margins are good.

“Housing resale markets are continuing to tighten, as the new home pricing growth has pushed more buyers into resales,” said Crocco. “We expect this pressure on resales to continue.  Builders continue to work through lot inventories that were bought or negotiated during the recession. As those inventories run out, replacement lots in comparable locations are costing a lot more. Builders are buying those lots, but also looking further out of the urban area to produce more affordable housing options.”

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

Market Area                 Ann Starts (% Chg)

St. Johns ………………………2,601 (+6.7%)

Duval……………………………1,653 (+9.4%)

Clay ………………………………. 734 (-11.2%)

The following table identifies the top ten communities as defined by annual construction starts.

Community                           Annual Starts

Nocatee (Duval)………………………… 917

Durbin Crossing (St. Johns) ………… 330

OakLeaf Plantation (Clay)…………… 226

Bartram Park (Duval)…………………. 143

Pablo Bay (Duval) ……………………… 110

Las Calinas (St. Johns)……………….. 110

Eagle Landing (Clay)………………….. 101

Palencia (St. Johns) …………………….. 88

Murabella (St. Johns)…………………… 87

Plummer Creek (Nassau) ……………… 82

 

For information contact:
Anthony Crocco -919- 314-0420
acrocco@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.

A Healthy – but Slowing – Market: Production Moving to the Higher Price Points

Posted in Central Florida Market | Posted on 12-10-2014 | Written by Metrostudy News

  • 3Q14 new home starts are down 6.6% compared to 3Q13, while the annual starts rate is up 4% YoY
  • The rate of new home price increases is slowing, but production of homes at the lower price points is dropping.
  • Starts of homes under $200k fell almost 48% from 3Q13

December 2014: Metrostudy’s 3Q14 survey of the Orlando housing market – including Lake, Orange, Osceola, and Seminole counties – shows that 2,614 single-family housing units were started in the quarter, a decrease of 6.6% compared to 3Q13.  The annual starts rate of 9,286 units has increased by 4.0% over the past year.   Single-family quarterly closings totaled 2,505 units, up 9.2% over 3Q13. The annual closings rate (past 4 quarters) of 8,987 units is 18.3% above the rate of 7,596 units per year recorded a year ago.

Third quarter starts in the Orlando MSA are the second highest in this upward cycle, and rebounded from a slight decline in second quarter compared to 1Q.  Third quarter closings continued a strong growth trend. The chart below shows the price distribution of annual housing starts in the Orlando MSA through the third quarter of this year compared to the three previous years.  New home pricing continues to grow, although not quite as fast as the previous year.

Annual Starts by Price Range

ac cf 3q

“Closings in the upper price points are lagging starts,” said Anthony Crocco, Director of Metrostudy’s Central Florida region.  “This is partially related to base pricing growth, which has slowed, and the time it takes for the closings to catch up with the starts. But it also indicates higher true inventories in the upper price ranges, which is not uncommon. Total single-family inventory equaled 5,262 units at the end of the third quarter, or 7.0 months of supply. Housing inventory increased by 6.0% compared to last year.”

Under construction housing inventory rose by 54 units to 3,136 units over the past year. Finished vacant inventory increased from 1,448 units last year to 1,763 this year. This quarter, 2,562 lots were delivered to the Orlando MSA versus 1,735 lots a year ago. Vacant developed lot inventory stands at 24,669 lots, a decrease of 2.9% compared to last year. Based upon the annual starts rate, this lot inventory represents 31.9 months of supply, a decrease of 2.3 months from last year.

Both housing and vacant lot inventory levels are in good condition. Finished home supply is down from last quarter.  The       under construction inventory level increased a bit, but are still in equilibrium, and less worrisome since finished units declined.  Lot inventories are nearing equilibrium for the Orlando MSA, although lots are needed in most of the top selling areas. Lot delivery rates have increased and almost equaled starts last quarter. We expect deliveries to continue to grow over the next few quarters, at least.

The Orlando MSA’s new housing industry is healthy in spite of slower growth. New housing starts have flattened as inventories are near equilibrium and pricing growth over the past 18-24 months has slowed new home sales paces. Still, closing paces remain strong and builder profit margins are good.

Builders are feeling pressure on pricing as they are having to replace lots bought during the recession with more expensive, newly develop lots in the same general areas. Builders are doing that, but also reaching further out to produce more affordable housing options.

MARKET HIGHLIGHTS

The top three market areas and sub-markets based on annual starts are shown below.

Market Area Annual Starts (% Chg)

Orange …………………………. 4,237 (-5.4%)

Osceola……………………… 2,644 (+40.5%)

Lake………………………….. 1,779 (+17.7%)

 

Sub-Market Annual Starts (% Chg)

SW Orange ………………… 1,632 (+12.3%)

South Orange ……………….. 1,251 (-0.4%)

Clermont/South Lake….. 1,153 (+10.1%)

The following table identifies the top ten communities as defined by annual construction starts.

Community                    Annual Starts

Lake Nona DRI (Orange) …………….. 452

ChampionsGate (Osceola)…………… 239

Wyndham Lakes Estates (Orange)..201

Heritage Hills (Lake) ………………….. 178

Windermere Trails (Orange) ……….. 177

Summerlake     (Orange)………………… 161

Tapestry DRI    (Osceola) ………………. 155

Eagle   Creek   (Orange) …………………. 155

Millenia Park (Orange)………………..142

Waterside Pointe (Lake) …………….. 140

 

For information contact:
Anthony Crocco -919- 314-0420
acrocco@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.

Prices Continue to Climb even as Demand Weakens; Lot Supply Tightens

Posted in Las Vegas Market | Posted on 12-10-2014 | Written by Metrostudy News

  • Prices of new homes continue their dramatic rise this year, continuing the squeeze on lower income and first time homebuyers
  • New Home Starts under $200k represent only 9% of 3Q14 activity, down 31% from 3Q13 levels
  • Supply of finished lots is at the lowest level since Metrostudy began tracking this activity in 2002

December 2014: Metrostudy’s survey of the Las Vegas housing market shows that through 3Q14, annual single-family new home closings were 5,695. That’s 14% LESSthan in 3Q13. The quarterly closing count improved slightly, as did the quarterly start pace. We counted 1,639 new home starts during the 3rd quarter of 2014 which is 8% less than the 3Q13 starts, but about 1% more than the previous quarter. The annual start pace decreased by 19% YOY. All of these indicators point to both slightly weaker demand and very tight lot supply.

“New home prices have risen dramatically this year,” said Greg Gross, Director of Metrostudy’s Las Vegas Region. “Our median “offer to build” price for active projects is $287K; 7% higher than one year ago.  We are seeing fewer and fewer homes available at the lower price ranges.

Production under $200K represents only 9% of all housing starts for the quarter compared to 3Q13 when 13% were under $200K. Pricing in the resale market has also improved rapidly. Average sales price for Single Family Homes increased 7% this year with Median sales price also increasing 13%. Compared to September 2013, the average asking price of for-sale homes is 23% higher at $307k.”

Las Vegas Shift in Housing Starts Pricing

greg lv 3q

Total Finished Vacant housing inventory has declined 16% this year. Single Family product which represents 35% of all inventory; has only 1.4 months of supply at current pace. Attached finished and vacant inventory is 1,905 with months of supply at 24. However annual closings of condos are improved dramatically during the past 2 years which lowered the condo supply considerably.

The highrise market has seen a significant flurry of activity this year as investors have realized the value of Las Vegas. Entry and mid-level product will be opportunistic as the market slide ends. The attached home market has seen the median sales price increase 10% this year

The lot inventory level has eroded steadily since the first quarter of 2008. “Class A” positions have quickly become in short supply over the past two years.  Total finished lot supply has fallen considerably over the past year and lot deliveries have remained slow. Months of supply stands at 16 and supply has decreased 8% since 3Q13. The net absorption of lots highlights the dearth of deliveries as we continue to deplete the supply even as 2,100 new lots were added during the third quarter. A total of 5,123 Single Family lots have been delivered over the past 12 months and lot supply remains near record lows.

The overall supply of finished SFD lots is declining and development opportunities for delivery in the next 4 years must be considered today. There are now 13,607 lots in development compared to 3Q13 when only about 9,300 lots were under development, immediate production capacity is still healthy for the next year. The majority of the new lots in development are in Summerlin, Inspirada and Cadence. It is worth noting that this number of finished lot supply is the lowest since Metrostudy began counting in 2002.

“One of the most challenging issues over the past year was the availability of lots and the impact on land prices,” said Gross.  “2013 marked a turning point as land development increased 81%. The third quarter of 2014 is no exception as lot development has increased 47% compared to 3Q13.  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. The tightened lending standards, lower FHA limits, rising home prices and interest rates and the expected increase in resale homes entering the market, are all factors which may cause new home buyers to rethink their home-buying decisions during 2014 and 2015.”

Metrostudy’s Weekly Sales and Traffic reports show that the weekly Sales per Subdivision has fallen below levels reached in 2012 and 2013. At the same time, both the weekly Cancellation Rate and the Weekly Cancellation Rate has risen higher than the previous two years. This is notable since the Traffic per Subdivision is higher than the past two years. It appears that while shoppers are visiting the new home communities, they are not committing to purchase at the same pace as we enter the end of 2014.

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, visit hanleywood.com.

High Expectations Meet a Weaker Economy

Posted in Northern Virginia Market | Posted on 12-10-2014 | Written by Metrostudy News

  • Our 3Q14 survey shows annual new home starts down 6% YoY;
  • Loudon County is the most active market area in Northern Virginia, with prices up 23% since 3Q12;
  • There are more choices for homebuyers as resale listings are up and the number of new-home communities has increased

December 2014: Metrostudy’s 3Q14 survey of the Northern Virginia housing market showed the annual new home starts rate of 8,179 down 6% from 3Q13’s rate.  Expectations for this year were much higher, but the weak economy may be taking its toll on the homebuilding industry. Annual new home closings were up as builders closed 8,584 units over the last four quarters. This represents an increase of 6% over the previous year, but competition has increased. There are more communities open now compared to last year, as measured by our model home count.

In the resale home market, supply is growing but not by enough to shift the market in favor of buyers. September resale listings in Northern Virginia numbered 13,795 units, up 37 percent from a year ago. Despite this sizeable increase, resale inventory corresponds to only 4.3 months of supply, which is rather low. Nationally, 6 months is considered normal, so prices should continue to climb though at a more moderate pace.

“Loudoun County is easily the most active market area in Northern Virginia, generating 3,450 starts during the year ending 3Q14,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic Region.  “This is actually down 11% from one year ago. The Loudoun County housing market has been a major beneficiary of defense-related jobs in Northern Virginia, but the weakness in the Scientific/Technical sector appears to be affecting builders in Loudoun more than any other area. Affordability is another issue, as the median new-home price has grown from $443,600 in 3Q12 to $547,000 in 3Q14, a 23 percent increase in only two years. Loudoun furthermore suffers from a shortage of lots, as vacant developed lot inventory measures only 15 months as of 3Q14.”

Prince William County is the second most active area with 1,319 annual starts, which is also down from one year ago – minus 7 percent. In fact, of the six most active counties in terms of starts, only two generated an increase in annual starts from one year ago. The 838 starts in Stafford are up 6%, and the 309 starts in Frederick are up 38%. Culpeper generated the largest percentage increase, growing 63 percent from 97 annual starts in 3Q13 to 158 in 3Q14.

The overall inventory of vacant developed lots (VDL), or finished lots, numbered 21,991 in 3Q14, which is up slightly from a year ago. With starts beginning to decline, the supply of VDL inched upward to 32 months up from 29 months a year ago. This is above normal for the area, but supply varies greatly by market area. Supply is generally smallest in the counties with the most starts: Fairfax, Loudoun, and Prince William. Higher lot supplies persist in Caroline, Warren, Orange, and King George Counties.  With some key submarkets under-supplied with lots, it is very important to monitor the pipeline of future lots.

Given the relative weakness in the demand indicators, it becomes increasingly important to monitor new-home supply. Finished vacant new homes in Northern Virginia number 1,044 units, which is up 34% from one year ago. Current inventory would last only 1.5 months at the 3Q14 annual closings pace. This is low, particularly given the amount of attached- product being built, but it is up from 1.2 months last quarter. This trend supports the anecdotal reports that some builders were building homes on spec in anticipation of demand that has been slow to materialize.

“The weakness in the market as reported by builders throughout the year has been evident in Metrostudy’s weekly survey of sales traffic and contracts, and it was apparent in this quarter’s field survey results as well,” said Sage.  “Over the last few years consumers have benefited from homebuyer tax credits and very low mortgage rates, and this drew down the buyer pool. We need job growth to replenish this pool and re-energize homebuilding, but the region just can’t get any traction on this front. Until it does, modest expectations of new home demand are warranted.”

For information contact:
Ben Sage -703.574.8429
bsage@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.