A Sluggish Finish for 2014: Housing Starts

Posted in National Housing Market | Posted on 12-16-2014 | Written by Brad Hunter

 

brad hHousing starts fell 1.6% from October and 7.0% from November 2013 with a decrease in single-family starts of 5.4%, according to today’s release from the Census.

There was no evidence of a strong pickup in home construction in the final months of 2014. According to the Census Bureau data released this morning, housing starts in November were at a seasonally adjusted annual rate of 1,028,000. According to the Bureau, this is 1.6 percent (±8.1%) below the revised October estimate of 1,045,000 and is 7.0 percent (±10.2%) below the November 2013 rate of 1,105,000.

Read More

75

 

New Data Confirm the Need to “Drill Down” for the “Real Story”

Posted in National Housing Market | Posted on 11-19-2014 | Written by Brad Hunter

brad h

Taken in total, the housing starts data paint a picture of boring, flat, lackluster performance in 2014.  Dig deeper into the data, however, and you see a much more dynamic picture.  The year is not over yet, but from the data we have collected first-hand, on nearly 100 metropolitan statistical areas in the country, we see markets ranging from a 21% decline in the past four quarters to a 45.8% increase!

Let’s look at a few of the stand-outs.  The data below indicate the percentage change in single-family detached starts from 3Q13 through 3Q14.

In Southwest Florida, the Naples/Ft. Myers market’s single-family starts rose 45.8% in the past year.   Demand is expanding rapidly in both counties in this region (Lee and Collier), predominantly family move-up, but with a rapidly-growing active-adult population.  Not only are single-family homes in demand, but low-rise condos and townhomes are booming as well.  This was a market that got massively overbuilt during the boom and fell extremely hard during the downturn.  Now it is coming up rapidly from a recently-low level.   Existing home prices in Lee County are already back up to early 2004 price levels.  New homes are concentrated in the $300,000-$400,000 range.

Southern California home construction is up 28.4% year-on-year, with the greatest increases occurring in the Inland Empire and in Los Angeles County.  This market had a massive foreclosure problem during the recession, but the quick (non-judicial) system in California allowed for a relatively quick clean-up.  Foreclosures and bank-owned homes are still numerous, but they no longer pose a competitive threat to the builders.

Lot development has picked up sharply in the past two years, with new lot “deliveries” running ahead of the current pace of housing starts.   (A lot “delivery” occurs when a homesite reaches the stage of infrastructure development at which a builder can start construction).

In the next five years, based upon demand, and based upon the data on lot deliveries, the Inland Empire (Riverside and San Bernardino) will see a massive surge of home building activity.

Benefitting from the same non-judicial foreclosure system as Southern California, Northern California is seeing very strong growth.  Single-family housing starts rose 23.4% over the past year, with the Bay Area and Sacramento both seeing increased activity.  The pace of lot deliveries is outrunning starts, which indicates the opening of new communities that will be starting more new homes in 2015.

Other winners over this time period were:

  • Sarasota/Bradenton, up 18.8%
  • San Antonio, up 17.1%
  • Austin, up 16.8%

A few noteworthy “decliners” were:

  • Boise, down 20.7%
  • Suburban Maryland, down 20.6%
  • Phoenix/Tucson, down 19.1%

Metrostudy Names Dennis Handler Regional Director for Southern California

Posted in National Housing Market | Posted on 11-19-2014 | Written by Metrostudy News

Irvine, CA – November 18, 2014   Metrostudy, a Hanley Wood company, announced today the appointment of Dennis Handler as Regional Director for Metrostudy’s Southern California markets.

Handler joins Metrostudy with over 15 years of residential real estate marketing and development and corporate finance for Fortune 500 and international companies.  This extensive experience has provided Dennis with a diversified understanding and knowledge base that has proven to be an invaluable resource for his clients. He most recently was an independent consultant for public and private builders, including D.R. Horton, Williams Homes and K. Hovnanian.  Additionally, he has provided extensive due diligence and market analysis for public and private residential developers, focusing on land and fee development budgets, entitlements and permits, strategic marketing, competitive analysis, and project management for projects located throughout California and Saudi Arabia.

“Dennis is a highly experienced professional and he makes a strong addition to the Metrostudy team,” said Mike Castleman, Metrostudy’s Western U.S. Senior Vice President. Handler will oversee all operations for Metrostudy’s Southern California market, including consulting with builders, developers and financial institutions regarding housing and economic market conditions.

For information contact
Danielle Fiore
(813) 361-5592
dfiore@metrostudy.com

About Metrostudy

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

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Metrostudy Releases Q3 2014 Residential Remodeling Index (RRI)

Posted in National Housing Market | Posted on 11-13-2014 | Written by Brad Hunter

Index Posts 3.3% Year-Over-Year Gain, Forecast For a 2015 Firming Remains Unchanged

WASHINGTON, DC (November 13, 2014) — Metrostudy, a Hanley Wood company, announced today the release of its Third Quarter 2014 Residential Remodeling Index (RRI) detailing activity in the remodeling and replacement industry.

On a seasonally adjusted basis, the index posted a gain of 3.3% year-over-year in the third quarter. While the rate of growth was slower than the prior quarter, the RRI has now posted ten consecutive quarters with positive year-over-year gains since the market bottomed at the end of 2011 and is on track to reach full recovery (a reading of 100.0 or more) in third quarter 2015. By fourth quarter 2015, the index is expected to surpass the previous peak recorded in early 2007.

The seasonally adjusted third quarter national composite of the RRI registered a score of 96.0, which was 0.8% higher than the revised second quarter result of 95.3. The 0.8% quarter-to-quarter increase follows second quarter’s 0.7% gain.

“The remodeling market thus far in 2014 is mimicking the muddling along of the overall housing market. The 2014 housing market has seen its share of first-time buyers hit a 27-year low, while the share of renter occupied housing reached its highest level on record in second quarter. The inability of younger households to purchase their first homes and begin remodeling projects is leaving a void in the overall measure of activity,” said Brad Hunter, Chief Economist of Metrostudy. “Yet, remodeling activity is being buoyed by growing families and baby boomers, the demographics with deeper pockets, and contractor sentiment is high for these groups. Despite the moderation seen in current 2014 growth, our forecast for the remodeling market to reach full recovery in third quarter 2015 has not changed, mainly due to continually positive job and economic reports that point to a firming in housing fundamentals over the near term.  Wage growth, which remains stagnant, will be key to watch heading into next year.”

The Metrostudy Residential Remodeling Index is a quarterly measure of the level of remodeling activity in 381 metropolitan statistical areas (MSA) in the U.S., with the national composite reflecting the national level of activity. “Activity” includes home improvement and replacement projects, but does not include maintenance or projects of less than $1000. The seasonally adjusted index shows the relative level of activity in the geography specified (MSA or national composite) compared to 2007 (the baseline year). A number above 100 indicates a level of remodeling activity higher than the level of activity at the beginning of 2007, which was the peak of remodeling activity in the prior decade.

The index is produced through a statistical model that leverages detailed data on remodeling activity, including household level remodeling permits, and consumer-reported remodeling and replacement projects. Quarterly historical results for the national composite and for each of the 381 Metropolitan Statistical Areas in the U.S. are available back to 2004. In addition, Metrostudy also produces annual estimates of project counts and expenditures as well as forecasts of the quarterly RRI and annual projects and expenditures.

Metrostudy produces the RRI to provide the industry visibility into local market remodeling activity, forecasted future activity, and potential demand.  According to the company’s third quarter report, 359 out of 381 Metropolitan Statistical Areas should see year-over-year growth in remodeling and replacement projects in 2014, with average growth of 4%.

Media representatives may request a full copy of the report by contacting Danielle Fiore at dfiore@metrostudy.com.

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. www.Metrostudy.com

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Metrostudy Florida Markets: All Florida markets witnessed year-over-year price growth in 2Q14

Posted in Central Florida Market, Jacksonville Market, Naples - Ft. Myers Market, National Housing Market, Sarasota - Bradenton Market, South Florida Market, Tampa Market | Posted on 11-11-2014 | Written by Metrostudy News

FINAL 2Q Florida Release and Infographic_Page_01

 

Florida’s new-home market has been surprisingly resilient in coming out of the downturn. Despite massive numbers of foreclosure homes for sale all around the state, builders have managed to find increasing numbers of buyers, and starts activity has rebounded nicely. Prices moved up rapidly in 2011, 2012, and 2013, rising at a more moderate pace in 2014.

2q chart

 

 

Florida Market-by-Market

Tampa:

The Tampa market continues its slow recovery from the devastating recession. Home starts fell by 85% from the peak to the bottom. While some broad based indicators remain positive, like job growth and the local unemployment rate, they have not resulted in robust demand for new housing. As of mid-2014, the Tampa annual pace for new housing starts was 5,853 units.

While this was a 69% improvement from the 3,462 homes built in 2009, it represents just 26% of the peak starts (22,409 units for the twelve months ending March 31, 2006). Families that lost their homes by foreclosure, have difficulty in qualifying for a mortgage or can’t afford the rising new home prices have driven a greater portion of housing demand into rental apartments.

Tampa Closings Average Price $/SF
2Q13 1,510 $241,924 $102.29
3Q13 1,484 $251,058 $104.96
4Q13 1,642 $264,895 $107.68
1Q14 1,108 $272,419 $106.33
2Q14 1,304 $276,138 $106.82

 

Over the last year, single family detached home prices are up 12.7% for the five county Tampa market. Homes that closed during the second quarter of 2014 had an average price of $288,006 versus $255,491 in 2Q13. Not only are prices rising, but the average home size is growing. The 2Q closing records showed the average detached single-family home was 2,738 SF, up 227 SF over the 2Q13 average of 2,511 SF. During the second quarter of 2014, both home size and price were essentially flat.

We have seen prices also rise substantially over the last year in townhome and villa product. The average closing price in 2Q14 was $210,243 or 11.9% higher than the $187,881 average in
2Q13. Unlike the detached product, the average size of attached product is shrinking.

Tampa is a highly concentrated new home market as the Top 10 builders accounted for 60% of all annual housing starts in the second quarter of 2014. The list of top builders includes nine national builders and just one local builder. Lennar Homes dominates the list and built more homes than builders #2, 3 and 4 combined.

 

Tampa,
August 1, 2013 – July 31, 2014

Builder Closings
LennarHomes    1,100
DR Horton 409
Pulte Group 343
M/IHomes 314
TaylorMorrison 280
HomesbyWestBay 262
Standard Pacific Homes 235
BeazerHomes 213
Ryland Homes 189
K.Hovnanian 185
TOTAL 3,530

Sarasota:

The Sarasota market is less reliant upon job growth to create housing demand as the market has a strong reputation for retiree demand. That did not mean that Sarasota was immune to the recession. New home starts fell by 86% from 9,113 for the twelve months ending March 31, 2006 to 1,284 units built in 2009. Sarasota has recovered quicker than other Florida markets and as of June 30, 2014, the annual start pace was 3,839 homes (up 199% from the cyclical low).

As the recovery has taken hold, new home prices are rising. In fact, single-family detached homes sold for an average of $310,266 during 2Q14. This was a 22.5% increase over the $253,285 average price in 2Q13. A portion of the price increase was directly attributable to larger homes being bought. The average new home was 2,368 SF in 2Q14 versus 2,076 SF in 2Q13. Buyers are looking for a fourth bedroom or home office particularly in Manatee County.

Sarasota Closings Average Price $/SF
2Q13 707 $247,643 $123.57
3Q13 827 $259,779 $126.41
4Q13 937 $284,759 $131.04
1Q14 677 $248,670 $130.09
2Q14 637 $295,825 $130.49

 

For town-home and villa product, prices have not changed over the last twelve months. The average closing price in 2Q14 was $224,293 or just 0.9% higher than the $222,364 average in
2Q13. The data does show that the average size of attached product grew to 1,765 SF. For the prior four quarters the average product size was between 1,597 and 1,680 SF.

Sarasota is a very highly concentrated new home market as the Top 10 builders accounted for
72% of all annual housing starts in 2Q14. The list includes seven national builders and three local/regional builders. The list is led by Neal Communities with 627 recorded closings, over one and a half time larger than #2 Pulte Group.

 

Sarasota,
August 1,2013- July 31,2014

Builder Closings
Neal Communities 627
Pulte Group 401
LennarHomes 374
DR Horton 355
TaylorMorrison 349
Ryland Homes 211
WCI Communities 175
Medallion Homes 116
Maronda Homes 109
M/IHomes 72
TOTAL 2,789

 

Southwest Florida:

Southwest Florida’s housing market has recovered nicely from the depths of the Great Recession, and closings were up 31% in 2Q14 over 2Q13. In fact, Metrostudy ranked the Cape Coral Ft. Myers MSA third and the Naples – Marco Island MSA sixth in last month’s “Top Ten Outlook and Market Health Ranking.”

SW Florida Closings Average Price $/SF
2Q13 611 $384,869 $171.12
3Q13 725 $390,281 $177.32
4Q13 891 $429,191 $188.42
1Q14 728 $434,339 $185.36
2Q14 800 $428,685 $173.00

 

During this same period, the average sales price was up 11%, and the size of the home increased by 10%. In particular, Naples showed a significant jump in pricing and home size, with a $75,000 average increase in pricing, to an average of $543,307, and an over 400 square foot increase (19%) in home size, to an average of 2,744.

However, the price per square foot in Southwest Florida only increased 1% from 2Q13. This may be an anomaly for the current quarter, as price per square foot prices had risen from an average of $171/sf in 2Q13 to over $185/sf in 1Q14. Or, it may reflect a developing trend with builders offering larger homes to offset the increase in sales prices. Metrostudy will monitor this metric to see if a trend emerges one way or the other.

 

Cape Coral-Ft Myers, Naples-Imokalee-Marco Island,
August 1, 2013 – July 31, 2014

Builder Closings
Lennar 943
Pulte-DelWebb-Centex 401
DR Horton 374
Stockdevelopment LLC 355
WCI communities 349
Gl Homes 251
TaylorMorrison 175
Habitat for Humanity 116
Toll Brothers 109
MintoBuilders 72
TOTAL 3,145

 

The Treasure Coast:

As with Southwest Florida, the Treasure Coast has seen a big recovery from the lows of the market back in 2010, and closings are up 36% the second quarter this year over the 2Q13. Home prices are among the most affordable in South Florida. However, prices continue to rise, with the average up 16% to $294,131. The average size of the home increased from 2,285 to 2,443, a 7% jump. Pricing per square foot is the lowest of all three areas, and at only $120/sf, represents a true bargain for South Florida home shoppers. It’s still relatively easy to find a new single family detached home selling for under $200,000 on the Treasure Coast. Nevertheless, the price per square foot increased 8% during this period, so the trend is moving upward.

 

Treasure Coast Closings Average Price $/SF
2Q13 190 $253,921 $111.12
3Q13 223 $283,141 $115.23
4Q13 259 $294,108 $116.20
1Q14 208 $288,007 $116.22
2Q14 258 $294,131 $120.38

 

Sebastian-Vero Beach, Port St. Lucie,
August 1, 2013 – July 31, 2014

Builder                   Closings
DR Horton 280
KolterCommunities Florida LLC 199
AdamsHomes 126
AV Homes, Inc. 96
GHO Homes 82
Pulte-DelWebb-Centex 60
Maronda Homes 59
MintoBuilders 59
KB Homes 45
HabitatForHumanity 32
TOTAL 1,038

 

Miami- Ft. Lauderdale:
South Florida is the most populous area with approximately 6 million residents. The Miami – Ft. Lauderdale MSA also placed in our Top Ten Ranking at ninth overall.

Miami-Ft. Lauderdale Closings Average Price $/SF
2Q13 1,033 $296,665 $154.40
3Q13 1,256 $377,697 $147.25
4Q13 1,331 $417,954 $154.28
1Q14 988 $425,785 $161.90
2Q14 994 $469,107 $171.46

 

Somewhat surprisingly, the closing rate declined by 4% in the current quarter when compared to
2Q13. This is also reflected in the annualized starts rate, which declined in 2Q14 as well. We are seeing the effects of a slight tempering in demand due to the relatively high sales prices and supply constraints caused by lot and labor shortages, which are noticeable in all three of the MSA’s counties.

Those price increases are on par with Naples, with a similar $75,000 jump in the average sales price, to $469,107. The increase in home size was more modest, at only 7% to 2,736. However, the overall size is one of the largest home sizes in all of South Florida; quite similar to Naples. South Florida also saw the largest increase in price per square foot during this period, rising from
$154/sf to $171/sf, or 11%.

In summary, prices continue to rise, although at a more modest pace, particularly in the past couple of quarters. Homes are getting bigger again, and we are likely to set another record for new home size in 2014. While home appreciation is likely to continue, there’s always the concern that higher prices will crimp demand. Supply constraints, especially in South Florida, might mask a muting in demand, but the other two areas could feel the pinch should prices rise beyond what consumers deem as reasonable.

 

Miami-Fort Lauderdale-West Palm Beach,
August 1, 2013 – July 31, 2014

Builder              Closings
Lennar 1,450
Gl Homes 630
DR Horton 397
CC Devco Homes 316
Standard PacificHomes 304
Pulte-DelWebb-Centex 265
Encore Homebuilders 240
MintoBuilders 226
Toll Brothers 219
TerraGroup 143
  TOTAL       5,640  

 

Jacksonville:

The Jacksonville MSA’s new home average closing price has grown by almost $35,000, or 14% in the 2Q14 when compared to the second quarter of 2013. The price per square foot has grown by almost $8, or just over 7% during that same period.

Jacksonville Closings Average Price $/SF
2Q13 1,122 $249,530 $102.12
3Q13 1,143 $259,474 $103.23
4Q13 1,184 $255,260 $104.84
1Q14 1,165 $272,197 $106.74
2Q14 1,297 $284,114 $109.67

 

Even with this pricing growth the market’s quarterly closing rate increased by over 15% in 2Q14 when compared to 2Q13. New home starts (not shown here) have been flat over the past 6 quarters. Starts grew from under 600 units in the 4Q11, to 1,400 units in 2Q13, but have stayed between 1,300 and 1,400 units per quarter since.

This indicates the market has reached a point where pricing growth has curbed demand. With the strongest market areas being in northern St. Johns County, it is likely the demand for lower priced housing will push demand out of the urban core. We expect to see stronger growth in new housing construction further south in St. Johns county, as well as in Clay and northern and western Duval County over the coming quarters.

 

Jacksonville,
August 1, 2013 – July 31, 2014

Builder             Closings
DR Horton 1,046
DreamFindersHomes LLC (Fl) 384
Lennar 373
Pulte-DelWebb-Centex 317
Kb Home 292
Richmond AmericanHomes-MDC 281
Mattamy Homes 251
DavidWeekleyHomes 245
Standard PacificHomes 152
Providence Homes(Fl) 146
TOTAL 3,236

 

Orlando:

The Orlando MSA’s new home average closing price has grown by almost $40,000, or 15% in the 2Q14 when compared to the 2Q13. The price per square foot has grown by almost $8, or just over 7% during that same period.

Orlando Closings Average Price $/SF
2Q13 1,855 $259,978 $109.05
3Q13 1,949 $274,837 $110.84
4Q13 2,088 $290,887 $112.50
1Q14 1,699 $290,197 $112.53
2Q14 1,757 $299,460 $116.71

 

Not surprisingly, the market has felt this pricing pressure as the quarterly closing rate declined by
5% in the second quarter of 2014 when compared to 2Q13. New home starts (not shown here) have been flat over the past 6 quarters. Starts grew from under 1,000 units in the 2Q11, to 2,400 units in 2Q13, but have stayed in the mid-2,000 range since.

What this ultimately means is that demand will be reduced in the urban core, and increase in the outlying areas as buyers look to find, and builders work to produce more affordable product. Orlando has a mix of buyers with significant international and active adult markets, yet remains primarily a Leisure and Resort Service and Retail Trade job market, catering to first time, first time move-up and multi-generational home buyers.

 

Orlando,
August 1, 2013 – July 31, 2014

Builder               Closings
Lennar 922
DR Horton 852
Meritage Homes 581
TheRyland Group,Inc. 484
Kb Home 416
M/IHomes 352
BeazerHomes 341
Pulte-DelWebb-Centex 299
TaylorMorrison 299
Standard PacificHomes 287
TOTAL 4,833

 

Florida is not just one market, clearly. Activity levels and pricing power vary from one market to the next, but the entire state is set for growing demand over the next five years. From the Millennials to the Boomers, an even greater influx of residents is coming to the state. Demand from retirees is expected to be a palpable force as 10 million more people reach retirement age in the U.S. over the next 5 years. Generation Y is so far showing a tendency to rent, but that will start to change as more of them start families.

For information contact:
Danielle Fiore
813-443-6504
dfiore@metrostudy.com

About Metrostudy
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
About Hanley Wood
Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

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.

1SD

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

2SD

 

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.

3SD

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.

4SD

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.

We’ve got LOTS to Talk About

Posted in National Housing Market, Northern California Market, Sacramento Market, Salt Lake City Market, Southern California Market, Tampa Market | Posted on 11-04-2014 | Written by Brad Hunter

brad hAs we approach the end of the year, it is always important to start to imagine what next year will look like for housing.  I think about that question every day, debating it, analyzing it, looking at the data, and imagining different scenarios.

Over the past few years the public on builders have been announcing that they have wanted to increase their community counts. To that end, large amounts of land were bought in 2012 and 2013 that are now being seen in the data as new lot “deliveries.”  We are seeing strong increases in new lot development in markets all around The country.  (“Lot deliveries” means the number of lots brought to the stage where they are ready for a builder to begin construction — roads and infrastructure in place).

Lot Deliveries Catching up with Demand

3q BH

Let’s take a look at some national trends as well as some specific local market trends, which can lend a glimpse into the direction of single-family housing starts for 2015.

Nationwide, lot deliveries are still trailing housing starts by a tiny margin, but the gap has finally nearly closed as lot deliveries rise sharply.  In some markets, the lines have crossed (meaning that lot deliveries are now running at a pace higher than starts), and that is a bullish sign for starts in 2015.

In the broad area we call “Southern California,” lot deliveries are running at an annual pace of 17,587 (during the four quarters ending 3Q14), and that is well above the pace of a year ago (11,784), and is also above the annual pace of housing starts (15,817).  These factors both suggest immediate plans to increase home construction volume.

In Salt Lake City, annual lot deliveries are up slightly, to 7,905 in the four quarters ending 3Q14.  This level is also higher than the last 4 quarters worth of starts (7,739).

In Tampa, lot deliveries have totaled 7,301 during the past year, up from an annual pace of 3,926 a year ago.  This level is far higher than annual starts, now running at 5,995.

In Northern California, lot deliveries are running 13,098 annually, up from 8,826 four quarters ago.  The pace of lot deliveries has been outrunning starts, which are at 10,918, but very likely to move higher, based upon these new communities and lots.

These examples might not have been too surprising, but here is one that is (or maybe I should say “encouraging”):  Phoenix.  Lot deliveries are running at 14,914, up versus 8,608 a year earlier.  This recent pace is in excess of the pace of housing starts, which has run 13,460 over the past four quarters.

What to make of this:

* On the demand side, the “case” for an elevated level of production hinges on higher job growth, which should bring with it better consumer sentiment and the release of more pent-up household formations.

* On the supply side, builders have been pushing for higher community count, and that means more lot development.

This surge in lot development will very likely result in an increase in the pace of home building next year.  The trajectory of housing demand is flatter, however, than when the builders bought the raw land that is now being turned into these lots.  In some cases, builders will have to price their homes at a level lower than what they had assumed when they originally underwrote the land purchase, or face a slower absorption pace.

That said, the long-term trajectory is decidedly upward.

 

Three important takeaways from ULI Fall Meeting

Posted in National Housing Market | Posted on 10-21-2014 | Written by Metrostudy News

brad hMetrostudy’s Brad Hunter will be attending the ULI Fall Meeting and here are 3 important takeaways he thinks every attendee should take note of!

1) Housing starts are only going to be up 2% or so for 2014. Is 2015 the year that housing “starts” will take off?

2) How will “denser suburbs” help to address the needs of home buyers in the next three years?

3) Will mortgage availability increase anytime soon?

Follow @BradleyHunter on Twitter to hear more from the meeting and remember to #ULINYC!

10/21/2014: 2014 ULI Fall Meeting

Posted in Events, National Housing Market | Posted on 10-21-2014 | Written by Metrostudy News

Schedule at a Glance

Top 4 Obstacles and Boosters for New Home Construction

Posted in National Housing Market | Posted on 10-17-2014 | Written by Brad Hunter

brad hHousing starts rose by 6.3% in September, which places activity 17.8% above September of last year, according to the government report just released at 8:30.

Read full article on Builder