Posted in Denver - Colorado Springs Market | Posted on 08-18-2015 | Written by Metrostudy News
- 2Q15 New Home Starts are up 13% from 2Q14 levels
- The number of starts in the second quarter is the highest figure of any quarter since 3Q07.
- The main threat to continued growth is rising home prices: nearly a third of all new home starts are in the $400-499k range. For the first time, half of all homes started in Denver have a base price of $400k or more.
AUGUST 2015 – Metrostudy’s quarterly lot-by-lot field survey of the Denver market shows 2,470 homes were started in 2Q15, up 13% from 2Q14. A very wet spring, which caused delays across an industry already stressed to deliver homes due to tight trade labor issues, pushed many home starts into the second quarter. Builders have started 8,152 homes in the last 12 months, a 13% increase from 2Q14 and the first time we have seen over 8,000 annual starts in 29 quarters.
“Regardless of the reason, the number of starts in the second quarter is the highest figure of any quarter since 3Q07,” said John Covert, Director of Metrostudy’s Denver region. “Builder traffic remains very strong year-to-date, as does sales contracts, which are up 20% and 33% respectively, compared to the first six months last year. As a result, Metrostudy believes that housing starts will push higher the 2nd half of the year as builders continue to play catch up.”
Builders also closed 2,237 units in the second quarter, an increase of 28% from 2Q14. Expect similar increases in closings in the 3rd quarter as many of the homes started in the 1st and 2nd quarters will finally be delivered. Annual closings in 2Q15 increased to 7,510 units, up 16% from 2Q14.
“Along with trade labor shortages, the other major impediment to housing growth in 2015 and beyond are rising home prices,” said Covert. “Strong demand for move up buyers combined with rising costs have placed more emphasis on higher priced product over the course of the last several years. The most prominent change in the past year has been in the $400,000-$499,999 price band where now nearly a third of all homes started are concentrated. And for the first time, half of all homes started in Denver have a base price of $400,000 or more, a trend that won’t likely reverse anytime soon. With demand shifting to move-up product and only 12% of the new home market priced below $300,000, the average sales prices are skewed higher, now at $468,564 for the trailing 12 months ending in June, which has now exceeded the previous high in December 2007.”
Despite the increase in home starts, vacant developed lot (VDL) inventory in the Denver Market has increased 14% since 2Q14 to 11,459 lots for a 21 month supply. Metrostudy considers 18-24 months of lots to be equilibrium for the entire market, a range that varies from one jurisdiction to another. Lot deliveries, which have outpaced starts recently, are up 43% from a year ago. But, too few lots are materializing in prime submarkets, especially for homes priced below $400,000, where only 3,200 lots exist for a 12 month supply.
“There are another 1,723 attached (condo, townhome, duplex) units in total inventory, up from 1,685 units in 2Q14, an increase of 2%,” said Covert. “Over two thirds of attached inventory is either townhome or paired product, which has quickly become a viable solution for both suburban and urban in-fill buyers offering a fairly diverse product offering.”
Since annual closings continue to grow, months of supply of finished vacant inventory has remained tight, now at 1.3 months, the same as it was this time last year. Finished vacant inventory remains incredibly thin for all price points below $400,000, declining 31% in the last year to 0.9 months of supply collectively. At the same time, finished vacant inventory has increased for all price points above $400,000, most notably the $400,000-$499,999 segment which has doubled in the last year. However, annual closings for this segment have increased 48% in the last year, so months of supply while slightly higher, remains well below two months.
While annual housings starts have increased for 14 consecutive quarters and Metrostudy expects starts to increase 15% in 2015, many builders will fall short of expectations coming into the year due to weather delays, lot shortages, and tight trade labor. Intense demand for housing and a historically thin supply of available listings continues to put extreme pressure on prospective buyers, especially those relocating to Denver in need of a home. Sales are likely leveling off in recent months due to low inventory levels and higher prices. As a result, sales prices have reached all-time highs of $362,000 for single family detached resales in Denver, an increase of 15% over last year.
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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