Don’t Be Misled by the “Drop” in Housing Starts: Some Markets are Showing Large Increases in Homebuilding

Posted in Economy, National Housing Market | Posted on 06-16-2015 | Written by Metrostudy News

June 16, 2015 – The government’s June report on housing starts showed an 11.1% decline, but that was on the heels of an incredibly strong report the previous month.   

We at Metrostudy have just completed another complete count of builder activity and new-home supply in markets all around the nation, and it provides strong quantitative evidence that the demand for new homes is still recovering, albeit slowly.  Furthermore, builders in most markets are confident that this slow-motion rebound will continue.  That is why builder confidence has improved and lot development is up 21.5% compared with a year ago (from the latest Metrostudy research).

The supply of new homes remains tight.  Finished new-home inventory is still at 2.5 months of supply, which is in the historically normal range, but somewhat low for a market that is starting to revive rapidly.  This explains the high rate of price increases on new homes.

There is much more detail available in Metrostudy’s research than is evident in the government data; some markets are actually showing very strong increases in homebuilding.  Here are some of the markets that we have found are increasing home production the most.  The former “bubble” markets figure prominently in this list, reflecting the fact that they had fallen so far during the downturn.

Recently-reported Metrostudy quarterly data, construction of single-family detached homes, versus four quarters ago.

  • Northern California                         +46.3%
  • Reno                                                     +44.9%
  • Las Vegas                                            +36.5%
  • Naples/Ft. Myers                             +27.4%
  • Tampa                                                  +15.4%
  • Atlanta                                                 +15.0%
  • Denver/Co. Springs                         +14.9%

Brad Hunter is Chief Economist of Metrostudy.

About Metrostudy

Metrostudy, a Hanley Wood company, is the largest provider of comprehensive research and insight for the real estate industry. Builders, developers, banks, manufacturers, retailers and many other industries all rely on Metrostudy’s data and analytics to support strategic business decisions at the local, regional and national market level.

About Hanley Wood

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Homeownership Still Correcting: An Analysis by Age Group

Posted in Economy, National Housing Market | Posted on 05-26-2015 | Written by Metrostudy News

  • We are in the strongest period of renter growth going back to the 1960s, when the Census began tracking rent vs. own.
  • Each of the three younger age segments have experienced a shrinking number of home-owning households, totaling a decline of 6.85 million over the last ten years.
  • The 55 to 64 group is unique in that the homeownership rate has shrunk (82 percent to 76 percent), yet the strong growth in the number of households allowed the number of homeowners to grow by 3.9 million.

MAY 2015 – Have you ever taken your temperature and been relieved to find out you had a fever? You say to yourself, “No wonder I feel so bad.” I had a similar moment while researching national homeownership trends, which dropped to a 25-year low of 63.7 percent in 1Q15. What is less often reported is that the number of households has grown steadily during this time from just under 93 million in 1989 to over 123 million in 2014. Furthermore, even though the percentage of homeowners is unchanged compared to 25 years ago, because of overall household growth there are now nearly 20 million more home-owning households in the U.S. compared to 1989.

The problem has to do with trends in the last 9 years. During this time the number of households has grown by nearly 10 million (plus 9 percent), yet the number of home-owning households has grown by only 660,000, which is less than 1 percent growth. Conversely, the number of rental households has grown by 9.2 million or plus 26 percent. This certainly explains why the apartment market has been so robust. Currently, multi-family permits (mostly apartments) account for 36 percent of all permits, compared to an average of 19 percent from 2000 to 2006. This is the strongest period of renter growth going back to the 1960s, when the Census began tracking rent vs. own.

55 Plus

That is one step to understanding the lack of strength in homebuilding, but it doesn’t totally explain the problem. Therefore I analyzed homeownership by age group, particularly over the last 10 years. First of all, in households where the head of household is below 35 years of age, overall household growth has been very flat. This is expected to change as echo boomers (children of baby boomers) age into this category, but for now the household count is very steady. Unfortunately, the number of home-owning households is shrinking, a decline of 1.85 million compared to 2004. This demographic is saddled with student loans, and they appear to value the benefits of renting … for now.

The 35 to 44 age range was easily the most devastated by the Great Recession. Not only is this a shrinking demographic (baby busters), but homeownership has shrunk from 70 percent to 59 percent in the last ten years. The combination of these two forces resulted in a decline of 3.8 million home-owning households in the last ten years. Many of these households may be inclined to own, but they need to repair their credit and get on firmer financial footing. This is also true to some extent of the next older category, 45 to 54, where the number of home-owning households has declined by 1.2 million since 2004. That means each of the three younger age segments have experienced a shrinking number of home-owning households, totaling a decline of 6.85 million over the last ten years.

Below 55

The 55 to 64 group is unique in that the homeownership rate has shrunk (82 percent to 76 percent), yet the strong growth in the number of households allowed the number of homeowners to grow by 3.9 million. These are the baby boomers, and they have driven the move-up market and kept the homebuilding industry off the mat. The oldest demographic at age 65+ is the largest group, nearly 29 million strong as of 2014. The homeownership rate is flat at 80 percent, and the number of home-owning households has grown the most – plus 4.3 million. This group will continue to grow as Americans live longer and as baby-boomers age into this segment. Combined, the two older household segments have contributed 8.2 million new homeowners in the last ten years.

Even though homeownership has continued to decline well after the end of the Great Recession, forces should begin to push the homeownership rate modestly higher in the coming years. When this happens, it will signify an important shift for our industry. This shift combined with a growing economy (hopefully), will fuel a stronger homebuilding market and begin to take away some of the energy that has been dedicated to apartments. This will be the aspirin we need to shed the low-grade temperature we’ve been running as an industry over the last few years.

Ben Sage, Director of Metrostudy’s Mid-Atlantic Region, has been researching and analyzing housing markets since 1994. He regularly meets and consults with many of the top homebuilders in the country as well as with lenders, developers, investors, and utilities concerning trends in the local economy and their effect on the real estate market. Ben can be reached at For more information, visit



Oil Prices and Houston Housing Starts

Posted in Economy, Houston Market, In The News, National Housing Market | Posted on 11-05-2014 | Written by Scott Davis

Scott DavisThere’s no question that there is a strong correlation between home prices and housing starts in Houston.  A significant share of our economy is still based on oil, and energy has been the fastest growing employment sector this year.


Historically there is a pretty strong correlation between starts and oil prices, looking back to 1980:



Oil prices have fallen significantly in the last 90 days, falling to $75, its lowest price since 2011.  There is some belief that the price drop may be geopolitical, rather than economic as Saudi Arabia may be trying to squeeze its OPEC competitors and Russia, most of whom require oil above $100/bbl to be profitable.  Even if true, US oil production is up almost 50% since 2011, and we see evidence of weakened demand from China and India.  It’s likely a result of a combination of these factors.

What does this mean for Houston?  We’ve plotted quarterly housing starts versus real oil prices from 1980 through Q3 of 2014, below.


The conclusion we draw is as follows:  there is a “sweet spot” between $55 and $90/bbl that produces the highest demand for Housing in the Houston market.  Above $90 it would appear that high energy prices dampen demand for housing because of the squeeze on consumer budgets for housing and in a market the size of Houston, transportation.  Below $55 it appears that demand is lessened because of weaker job growth.  The Energy Information Administration’s pricing forecast for oil in 2015 is $91, and Saudi Aramco needs oil at about $93 to be profitable.  We expect oil prices to rise slightly to that level through the quarter and remain there on average through the balance of 2015.


What does this mean for Houston?  We expect job growth, presently 112,900 (+4.3%), to slow and to place pressure on upward prices.  The resulting declines may make some newer developments less favorable and place them under financial pressure.  Overall, however the fall in oil prices will be beneficial because:

  1. Declining energy employment, particularly in the downstream sector, will relieve pressure on labor shortages for the construction industry, reducing one of our market’s key cost drivers.
  2. Lower gas prices will favor development in more remote markets, opening up lower cost sources of land and encouraging development of lots at the lower range of the market;  about one third of new home buyers in Houston are in the under $200K price band, a segment increasing difficult to meet.
  3. Lower energy prices may assist improving economies in other markets which should help the share of Houston’s economy dependent on national economic performance.
  4. Houston’s energy economy includes upstream, midstream and downstream energy.  Downstream energy, exploration and production, will likely suffer from extended low energy prices.  The two other sectors, midstream (pipelines) and upstream (petrochemical manufacturing) will likely improve as lower prices encourage more consumption nationwide requiring more oil/refined products to be transported (midstream) or manufacturing sees lower costs for feedstock (upstream).

Houston’s economy remains heavily dependent on the energy industry, both in direct employment and supporting economic activities indirectly tied to it.  It’s important to remember that energy projects are generally significant long term investments that are not very sensitive to daily or weekly price movements and the long term worldwide trend for oil consumption still points upward.  In the short to midterm timeframe, the recent declines in energy costs should actually prove to be a positive factor in Houston’s housing market, not a negative one.

Metrostudy’s Brad Hunter Says 5.5% Rates Still A Year Off

Posted in Economy, National Housing Market | Posted on 12-27-2013 | Written by Brad Hunter

This link is to an interview on Bloomberg Radio, conducted just after the latest New Home Sales number was released by the Census Bureau.  In this interview, I immediately express skepticism about the government’s number.

After the interview, I reflected on the way in which the stock market moves based upon that number.  The huge spike in sales in October is completely at odds with that we are hearing from the leadership in the homebuilding industry nationwide, and from our weekly survey information.  Part of the problem is that the government number ignores cancellations.

Despite the flimsiness of this statistical series, it moves the markets.  Because it is a topic that clearly carries a lot of importance, I try each month to inject some additional information, some perspective, and some better data into the discussion, so that people aren’t misled.

See The Interview Here (scroll down and find the audio from December 24th – Metrostudy’s Brad Hunter Says 5.5% Rate Still A Year Off)

Why Home Builder Stocks Are Falling – Brad Hunter on CNBC

Posted in Economy, National Housing Market | Posted on 06-24-2013 | Written by Metrostudy News


brad hBrad Hunter discusses the effects of rising mortgage rates on the housing market and homebuilder stock prices.

See Full Video Here

Housing Starts: Back over 1 Million!

Posted in Economy, In The News, National Housing Market | Posted on 04-16-2013 | Written by Brad Hunter

Today’s housing report from the Commerce Department show that the pace of U.S. housing starts is back again over One Million per year.  That is a simple milestone for those that monitor the new home construction market, conveying in an easy-to-understand way that the housing market is finally doing more than crawling out of its grave.  Housing is no longer dormant, and this theme will resonate broadly across the U.S. economic and cultural landscape.

The positive psychological effect of surpassing that attention-getting number may be support greater confidence among homebuyers.  Potential homebuyers (or sellers) are receiving more and more data that reinforces their belief that housing is recovering, and that belief will translate into more confidence in their decision to buy a home.

We do know however, that a great deal of the surge in construction has been in the multifamily arena, where a massive apartment boom is taking shape.  Multifamily construction drove the entire housing starts number higher, and is now running at more than 400,000 a year!  The multifamily ratio is the highest it’s been since the 1980s, during that decade’s apartment construction boom.

Single family housing starts fell in March according to the government release, but are up 28.7% nationwide versus a year ago (comparing March 2013 with the same month a year ago).

A ‘flash’ look at Metrostudy’s data, due out in full next week, show some extremely strong numbers for the first quarter.  Charlotte, North Carolina starts, just in, are up 35.7% as of 1Q 2013, compared with 1Q 2012.

Some of the markets that fell the hardest during the downturn are rebounding the strongest:  South Florida single-family starts rose 61.2% in 1Q13, compared with 1Q12.  Las Vegas single-family detached housing starts are up 69% versus 1Q12.  Tampa starts rose 48.3%, for the second-highest pace in five years.  Sarasota starts rose 70.5%.

The increases in home construction reflect bona-fide increases in demand, driven by the re-emergence of folks who had hunkered down, taken on roommates, or moved back in with parents.  The renewed strength that is being observed in markets all across the country, even those that got humbled a few years ago, is impressive, and attention-getting, to the lay observer and the expert alike.

Shopping, Shipping, and Shifting Hubs

Posted in Economy, National Housing Market, Northern Virginia Market, Suburban Maryland Market | Posted on 04-08-2013 | Written by Metrostudy News

I love the fact that I can purchase just about anything I want, anywhere, at any time with a few simple touches to the screen on my phone.  My order is delivered to my home in no time, and delivery time continues to grow shorter as companies like Amazon rely on bigger regional distribution centers.  I started thinking about this retail magic and how meli1the changes to our global supply chains, and those yet to come, will shape how we live and work.  On one of my recent trips to Baltimore, I was reminded of a potential game changer – Panamax.

Sometime in 2015, the $5.25 billion widening of the Panama Canal will be complete and a new class of super ships will be able to pass.  The Port of Baltimore is poised to accept these 1,200’ long, post-Panamax ships, capable of carrying three times more cargo than the traditional ship.  The port is now home to four, 400-foot-tall cranes, the largest of their kind in the maritime industry. These cranes can reach 22 containers across on a container ship and lift 187,300 pounds of cargo.  Even though the ships won’t arrive for some time, operators of the ships are planning which ports they will ship to and Baltimore stands ready to compete with its 50-foot channel and new cranes. Read the rest of this entry »

Metrostudy Housing Industry Market Sentiment Survey – 2Q 2013

Posted in Economy, National Housing Market | Posted on 04-05-2013 | Written by Metrostudy News



Invitation to Participate in the

2Q 13 Market Sentiment Survey

As part of our ongoing housing market research, we are conducting our quarterly Housing Market Sentiment survey.

Metrostudy is a real estate market research and consulting company offering specialized services to local and national homebuilders, developers, and lenders in the new home construction industry.

Metrostudy provides local market analysis services throughout the United States and has been gathering and analyzing real estate market research information since 1974.

Please click on the link below, and in less than three minutes complete Metrostudy’s Market Sentiment Survey.


Metrostudy has been conducting a quarterly market sentiment survey for just under 10 years. The purpose of the survey is to assess the general and specific sentiment of key segments of the homebuilding industry. The survey is sent to approximately 18,000 participants in the homebuilding industry: builders, lenders, brokers and developers. On average, Metrostudy has enjoyed a 4 to 5% response rate from those sent the survey


Phone: 800-22-STUDY, 110


Houston Housing Market 2013 – The Way I See It

Posted in Economy, Houston Condo Market, Houston Market, In The News, National Housing Market | Posted on 01-11-2013 | Written by Mike Inselmann

Houston Housing Outlook 2013

Greater Houston Builders Association Presentation

By: Mike Inselmann, Founder and Former President of Metrostudy

The outlook for housing, and indeed most types of real estate, is very bright indeed as the New Year begins to evolve.  After a long, anxious, and scary, recession market conditions are exceedingly favorable for all types of housing sectors in Houston.

The National Economy is showing signs of a steady, but unexceptional recovery pace assisted, ironically, by a burgeoning increase in new home construction (and all the jobs and materials needed in support of home building).  The mortgage industry misbehavior in the middle of the last decade triggered a housing downturn that pulled almost every sector of the US economy into the morass of all too familiar since 2008.  Now housing is poised to play a significant role in the recovery of the next few years.  The end of the recession, expansion of job growth, the welcome end to the election season and all the negative rhetoric has improved the spirits of consumers.  Spending on consumer goods, autos, and now housing is having a positive effect on the economy.

Houston is at the top of almost every list relating to housing and real estate.  The downturn in Texas and Houston was not as severe as most of the ‘crisis’ markets around the country, and the upturn began sooner and is likely to be more sustainable due to the inordinate share of job growth being created in Texas and Houston.

The Houston economy moved from the recovery phase in November 2011, when the local job market regained all the jobs lost in the recession, and began building an ever larger employment base that has now reached roughly 2.8 million workers (double the job base at the end of 1982).  Houston will show an additional 95,000 jobs since that point in November 2011 once the final 2012 figures are tabulated.   Jobs are the principal driver of demand of demand for all goods and services;  jobs create households and household growth is the demand for additional housing, both for purchase and for rental.

The robust job recovery, thanks mostly to the expansion of the energy sector in the past few years, has created enough households to absorb all of the excess housing in Houston for single family homes, rental homes, during the second half of 2012.  Home prices are rising, apartment rents are the highest in history, and builders of both new single family homes and rental apartments are ramping up construction to try to match this new demand.  Consumers of housing in the next six months will come to realize that the window of opportunity to lock in a ‘deal’ on a new place to live has closed.

Prices will most certainly continue to rise because of the mismatch between supply and demand alone, but cost increases will also play a major role in housing price increases.   A dearth of buildable lots has home builders scrambling to find places to build homes and lot costs are increasing too.  Apartment builders are paying dearly for well located sites near or within Loop 610 as well.  Furthermore the surge in construction in the past year caught the supply chain flat footed as the supply of concrete, building materials and labor are challenging the industry to raise prices to cover the increased costs.  It is quite possible that the demand for housing will remain stronger than the builders’ ability to deliver units for much of the coming year.

Single Family Resale homes listed in MLS at the end of December amounted to a 3.7 month supply the lowest in 12 years.  Sales of pre-owned Single Family homes listed in MLS have risen 24% since June of 2011 even as the number of listings has declined.  During that same period demand for new Single Family homes has risen 39 %.  So, sales are increasing, supply is shrinking and prices for both for sale housing and rental apartments are on the rise.

In the past 15 years demand for new single family homes has averaged 30,000 per year, compared to an average of 22,000 over the past 30 years.  Metrostudy calculates the sustainable demand for new single family homes to be approximately 32,000 new homes per year based on job growth and population forecasts for the Houston Region.   In 2012 builders started 23,500 so there is room to grow before reaching that projected demand.   But some hurdles remain that make it difficult to reach that level very soon.  First is the previously mentioned short supply of lots, materials and labor to build homes.  But, mortgage underwriting standards remain restrictive, and many transactions for new and existing homes that do sell are subject to an ongoing disagreement over appraised values.  Furthermore, demonstrated demand from first time buyers has been severely restricted by credit issues and underwriting restrictions.  It is unclear whether the local market can reach the 32,000 annual units of demand without some contribution from first time and low to moderate income buyers.  But it will come, and in the meantime home builders will likely start construction on between 26,500 and 27,500 new homes in 2013, an additional 13-17% increase in the coming year.  That is, if production can keep up with demand.

Development Impact Fees…or some might say…Bureaucratic Taxation

Posted in Economy, National Housing Market | Posted on 11-15-2012 | Written by Bill Miley

Let’s begin by defining impact fees. They are a flat dollar fee (tax) charged to a developer for a new development (per lot or home, regardless of sales price) for the services or facilities the new development requires from the government. While the fee ends up being charged to the builder in the lot price, it is included in the cost of the new development and ultimately paid for by the homebuyer. Common terms used to refer to impact fees include “capacity fees,” “facility fees,” “system development charges”, “capital recovery fees,” and my favorite from the politically correct crowd, “adequate public facilities ordinance,” or AFPO, which are primarily designed to pay for new schools as the population grows. Like so many government programs that begin as a sensible and reasonable concept, they evolve quickly and quietly into revenue producing destructive programs loved by city planners and elected officials. They have the power to strong-arm developers into “offering” impact fees in order to get official blessings on new residential subdivisions, especially when no one with integrity could claim with a straight face that the “offer” might in some circles be considered “grease for the deal”. Unchecked power breeds arrogance. Some city council elected officials, fearful of mentioning raising property taxes simply create rules and ordinances to circumvent years of poor planning, maintenance and wasteful spending. After all, what’s wrong with imposing ‘pay to play’ requirements on developers? Shouldn’t they bear the burden for new growth (i.e. new home buyers) Read the rest of this entry »