(Denver, CO – May 2, 2013) Sizeable increases in new home starts demonstrate not only strengthening builder and consumer confidence, but that ‘organic’ growth (job creation and population growth through in-migration) is the fuel needed to kick-start and maintain a healthy industry, according to a recent report by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.
Denver’s current employment estimates indicate that employers continue to grow payrolls at a healthy pace, adding 34,500 jobs the past 12 months. The average annual growth rate is now 2.8% compared to 2.5% last March, extending the best run of job growth in Denver since 2000. “With Denver’s continued strong growth, the region still ranks among the top 10 MSA’s nationally for annual job creation, with the Natural Resources & Construction, Professional & Business Services, and Education & Health Services sectors demonstrating particularly robust growth,” said John Covert, Regional Director of Metrostudy’s Albuquerque and Denver Markets. The unemployment rate for Denver in March is still at 7.2%, where it’s been pegged for the last several months. Colorado’s unemployment rate is 7.3% compared to 8.6% a year ago.
According to Metrostudy’s quarterly survey 1,596 homes were started in the first quarter, up +52% from 1Q13 when 1,050 homes were started. Builders started 6,084 homes in the previous twelve months ending in March, a +60% increase from the 3,811 annual home starts in 1Q12. “Metrostudy is forecasting a 35% increase in home starts for 2013. Not quite the 55% increase the industry had in 2012, but given tightening lot supplies and inevitable price increases, activity in the second half of the year will likely slow down, “said Covert. Builders also closed 1,425 units in the first quarter, an increase of +39% from the 1,027 closings in 1Q12. There were 5,599 annual closings in the previous twelve months, a +29% increase from the 4,364 annual closings in 1Q12.
At the end of March there were 4,437 new homes in inventory, up +12% from a year ago and up 4% from last quarter. Despite the increase, the total is still only a few hundred units above the lowest inventory count in this housing cycle. Of that total, 2,770 are single family detached units that are either under construction, finished & vacant or are decorated models. The supply of total SFD inventory ticked down from 8.4 months last quarter to 7.9 months this quarter, but is up from 7.3 months a year ago. However, with home starts up over 50%, a rise in inventory is to be expected, and with move-ins up 39% inventory levels have been kept in check. Equilibrium for total housing inventory is considered to be around 7.0 months. “Since annual starts are now outpacing closings, and both are trending up, Metrostudy expects inventory levels to stay about the same throughout the year with some seasonal fluctuations, “said Covert.
What officially began as a ‘scramble’ for lots a year ago has only intensified this year. Lots in quality submarkets are virtually all spoken for at a time when builder appetite is high and lot deliveries remain encumbered by capital flow and an industry yet to ramp up resources needed to develop lots. The number of vacant developed lots has fallen for 20 consecutive quarters since peaking at over 20,000 in 1Q08. Currently there are 11,777 VDL on the ground, down -16% from last year. Of the total, 7,704 lots have frontages of 79 feet or less and are generally for production homes. At the current absorption pace, there is a 20 month supply of ‘production’ lots in the Denver Market when equilibrium is around 18 months. For lots in active communities, supplies are tightest for homes priced below $200,000 at 5 months’ supply, down from 22 months a year ago. “All other price segments have summarily fallen in the past year. Lot supply relief appears a ways off so these numbers are expected to tighten further,” said Covert.
“The ‘uncoiled spring’ that was the housing market, has sprung to life this past year. All segments of housing are contributing to the resurgence, including a strong resale market where median prices have jumped 15% in the last year to $268,200, a recovering new home market, and healthy apartment market. With employment numbers trending in the right direction, the future of housing in Denver looks bright for the first time in years. For now, however, builders must grapple with the stark reality of cost increases associated with land, materials, fees, vendors, etc. until we finally move away from the extremes of the past decade and establish a more balanced industry that is better prepared for strong growth,” said Covert.
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.
About Hanley Wood
Hanley Wood, LLC is the premier media, event, information and strategic marketing services company serving the residential, commercial design and construction industries. Through its operating platforms, the company produces award-winning digital and print publications, Newsletters, websites, marquee trade shows and events, Market Intelligence data and strategic marketing solutions. The company also is North America’s leading publisher of home plans.