Posted in Central California Market | Posted on 06-01-2015 | Written by Metrostudy News
- Through 1Q15, the annual starts rate is up 4% YoY, with starts higher in seven of eight counties
- Price increases have been moderate as builders are reaching affordability limits and may be more concerned with maintaining absorption pace
- The San Joaquin/Stanislaus region will benefit most from the rapidly improving Bay Area market as buyers move inland to find more affordable and abundant housing.
June 2015 – Metrostudy’s 1Q15 survey of the Central California region shows that the improving job numbers seem to have had a positive impact in the new home market this quarter. Annual starts and closings as of 1Q15 improved, with starts up 4% to 6,176; and closings up 2.4% to 5,748. This is indicative of a stabilizing housing market. Builders are adjusting pace based on current demand.
“Compared to 1Q14, annual new home starts were higher in 7 of the 8 counties Metrostudy monitors,” said Greg Gross, Director of Metrostudy’s Central California region. “Starts in Fresno County were 12% lower than this time last year. Merced had a very impressive increase of 70% as did Tulare County with a 23% increase in starts suggesting demand is beginning to stabilize in the more expensive markets, and picking up in the more affordable markets.”
Regionwide the average “offer to build” base price for new Single Family detached homes increased a modest 2% to $318K compared to 1Q14. Builders are reaching affordability limits and may be more concerned with maintaining absorption pace and are adjusting prices accordingly. In some submarkets, higher priced product is being offered as builders are seeing increased traffic and demand, especially in Kern, Fresno, and San Joaquin Counties.
Finished inventory of homes has decreased during the 1st quarter. Metrostudy counted 1,060 Finished Vacant Single Family homes this quarter; the market now has 2.2-months of supply, an improvement from fourth quarter. We will continue monitor these inventory levels as there are an additional 2,020 new homes under construction. Builders will need to adjust to the changing demand dynamics expected in 2015.
The Central Valley has been absorbing more lots than were delivered for most of the past three years, making a noticeable dent in the number of finished lots. 2014 did experience a slight reversal in this trend as 6,216 new lots were added to the supply.
As 2015 begins, the Central Valley demonstrated a fairly respectable economic improvement, especially considering the extreme drought, tightened lending standards, rising construction costs and overall economic uncertainty.
“Overall job growth remained positive so far this year and improved in most all counties; this should keep the demand for new homes moderate,” said Gross. “We are optimistic that pent up demand will continue through 2015, but the challenge will be converting this demand into buyers. The San Joaquin/Stanislaus region will benefit most from the rapidly improving Bay Area market as buyers move inland to find more affordable and abundant housing, especially with falling gasoline prices.”
Metrostudy expects the Central Valley housing market to remain steady over the course of the next year. Notably, Kern, Fresno, Stanislaus and San Joaquin Counties will be most stable and consistent housing markets in all of Central Valley.
For information contact:
Greg Gross – 916.231.9370
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
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