Posted in Albuquerque Market | Posted on 05-01-2014 | Written by Metrostudy News
May 1, 2013: Metrostudy’s 1Q14 survey of the Albuquerque housing market revealed that activity continues to be impeded by a persistently stagnant local economy and rising interest rates. While consumer confidence is slowly recovering on the national level, Albuquerque is still grappling with meager job growth and high unemployment.
According to Metrostudy’s quarterly survey, 294 homes were started in the 1st quarter, up 25% from 4Q13, and down 14% from 1Q13 when 340 homes were started. There were 1,379 annual housing starts in 1Q14, a 3% decline from the 1,419 annual starts in 1Q13. 2014 will likely be the 6th consecutive year with annual starts under 2,000 units for the Albuquerque market, when 5,000-6,000 starts are more in line with long-term expectations. Builders also closed 322 units in the first quarter, down 16% from last quarter, and unchanged from the 322 closings in 1Q13. There were 1,479 annual closings in 1Q14, an 8% increase over the 1,370 annual closings from a year ago.
“The fact that annual starts and closings over the last year are virtually identical indicates that builders are only building to current demand and that builders and banks have very little appetite for speculative inventory, which in a growing market would be justified,” said John Covert, Regional Director of Metrostudy’s Albuquerque and Denver Markets.
Vacant developed lot (VDL) supplies have been on a downward trend for nearly five years as new lot deliveries have yet to exceed home starts during that period. For the fourth consecutive quarter there has been a 68 month supply of lots based on the trailing annual starts pace. Metrostudy counted 7,510 ‘shovel ready’ lots on the ground, an 11% reduction in lots from a year ago.
Builders remain very sensible about inventory levels as the months of supply of total inventory is now 7.2 compared to 8.7 a year ago. This is the lowest supply in months for total inventory since the end of 2008 and is at a level now just slightly above what is considered equilibrium, 6-7 months, for the Albuquerque market. One of the best indicators of the health of the housing market is the measure of finished vacant inventory homes – those units that have been completed but are still vacant at the time of our survey. There are 392 finished vacant units (all product types) on the ground, down 1% from a year ago and still hovering around the lowest levels since 2004. The supply of finished vacant inventory is still high but declining at 3.2 months, above the 2.0 months supply considered equilibrium for the market.
Despite the ongoing weakness of Albuquerque’s economy and housing market, there are plenty of successes to refer to and, maybe more importantly, opportunities that exist as the market recovers. The jobs picture does have some bright spots, including: mining, oil and gas production, technology, tourism and transportation which are all sectors adding to New Mexico’s economy. Sectors that continue to act as a drag on the economy include construction, the federal government, and professional and technical services.
“It’s well documented how Albuquerque trails much of the country in terms of economic recovery, and thus may follow a similar path many markets have experienced in the last year or two with housing as a solid contributor to economic strength,” said Covert. “Until that time comes, builders, developers, and lenders must continue to focus on sound strategy and operational efficiency in order to manage risk and take advantage of opportunities as they emerge.”
For information contact: john covert @ 720.493.2020 x 201
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
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