Posted in Indianapolis Market | Posted on 05-27-2014 | Written by Metrostudy News
May 27, 2014: Metrostudy’s 1Q14 survey of the Indianapolis housing market shows welcome signs of growth and stability. Including single-family detached units, townhouse units and duplex units in the six- county Indianapolis region; there were a total of 4,340 new units started in the twelve-month period ending 1Q14, an increase of 10.4% over the previous year. The 839 units started in the first quarter of this year represent a decline of 11.5% over the 1Q13 starts total. The annual rate of closings rose in the first quarter. There were 4,150 closings during the twelve-month period ending 1Q14, an 8.4% increase compared to the prior year. 1Q14’s total of 744 closings is down 10.6% from 1Q13.
“Our 3Q13 tally of 1,274 was the most new home starts in any quarter since the second quarter of 2008 – over five years ago,” said Chris Huecksteadt, Director of Metrostudy’s Midwest Region. “The lower total of 839 starts for 1Q14 is expected given the seasonality that exists in the local housing market, and the tough winter we experienced. That being said, following several years of market declines, the more recent uptick in new home construction is certainly a welcome sign.”
Growth in the overall market can be seen in several submarkets, most notably Hamilton, Marion, and Boone counties, despite some weather related slowing. Hamilton County still leads the way with approximately 42.9% of all new home construction in the Indianapolis region. Hendricks County is next representing 14.7% of Indianapolis new home construction over the past year. These two counties will likely continue to account for over 55% of all new home demand through 2014. In addition, Johnson County will continue to gain in market share through 2014, and will likely surpass Marion County later in the year.
Finished and vacant inventory has steadily fallen in the overall market, leading to the need for new home construction as demand begins to grow. The supply of finished and vacant inventory fell to 1.5 months overall, the lowest level of supply since the start of the downturn in the housing market. Levels of new home supply are low in nearly all of the counties that make up the Indianapolis market. Only Hancock County has more than a two-month supply of inventory. The low levels of new home inventory will continue to necessitate more construction, as demand will continue to increase if job growth is sustained.
With the consistent pace of new home construction, and a declining level of vacant developed lot inventory, the months of supply for lots in Indianapolis has fallen from a high of nearly 80 months in 2Q09, to a current level of just 30.9 months. This indicator is just above the equilibrium range of 24 to 30 months, with the trend continuing to move downward. “New lot development has begun to occur at levels not seen for several years,” said Huecksteadt. “Nearly every market area in Metrostudy’s survey saw a significant decline in the amount of vacant and developed lot inventory during the past year, with the exception of Marion County.”
The most dramatic declines have been in those markets that had limited levels of new lot deliveries: Hancock and Johnson counties. Of course new lots continue to come on line in other markets, but much of the excess is being absorbed. This is not to say that the concerns about excessive lot inventory are at an end. There are still numerous developments throughout Indianapolis that are in less desirable locations and priced too high for today’s market.
That being said, Metrostudy does not expect a dramatic increase in the rate of new home construction to occur during the year. There are still several obstacles in the way: modest – though improving – job growth and consumer confidence, and some uncertainty that the growth that has occurred in the local economy will be sustained. In addition, relative to the size of the housing market, there is a considerable amount of competition fighting for the potential new homebuyers that are out there.
For information contact Chris Huecksteadt @ 847-651-9080
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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