- The Reno housing market continues to boom as 4Q14 new home starts are up 54% from 4Q13
- Annual new home starts for 2014 were 1,458, up nearly 25% over 2013
- Affordability and supply are concerns as new home starts are concentrated into the higher price ranges; supply of finished homes is at its lowest point since 2006
March 2015: Metrostudy’s 4Q14 survey of the Reno housing market showed that while job growth may have cooled slightly this year, annual new home starts and closings continue to rise. Annual new home starts through 4Q14 were 1,458, up nearly 25% over 4Q13. Annual starts are an indicator of future new home closings, and annual closings are 1,331, which is 24% more than one year ago. Increased demand continues to drive builders to start new homes. Quarterly new home starts in the fourth quarter were 54% higher than in 4Q13.
Our average “offer to build” base price for new homes in active projects decreased slightly to $331K. This is an increase of about 1% from one year ago. The average price has increased steadily since 2012 and now, base prices have remained fairly steady over the past year. Builders are pricing their product to the competing resales and trying to remain in line with market affordability.
“Start activity has shifted over last year into the price ranges above $300K as builders adjust pricing to offset increased land and construction costs,” said Greg Gross, Director of Metrostudy’s Nevada region. “Again, this quarter we are seeing starts fall in the range below $300K. Lot costs are also increasing as lot supply dwindles. Affordability remains a concern as home prices are rapidly increasing. Last year, 54% of all new home starts were under $300k; this year only 39% were priced below $300k.”
With 126 Finished Vacant Single Family homes, the market has only 1 month of supply at current absorption pace. The number of Finished Vacant Homes is at the lowest level since Metrostudy began tracking the Reno market in 2006. Finished Vacant Homes make up only 15% of total housing inventory which is below what we consider equilibrium. However, the number of Under Construction homes has increased 30% since last year. We will continue to closely monitor inventory levels over the next two quarters, but it appears the market is not at immediate risk for over-supply.
The Reno market has virtually ceased single family lot delivery, but with lot absorption outpacing lot deliveries for more than four years, lot Inventory continues to shrink. The greater Reno market has less than 5,000 Finished and Vacant single family lots which equates to 41 months of supply or roughly 3.5 years, based on current start pace. Only 3 years ago we had 14 YEARS of lot supply!
Over-supply of lots along with diminished demand has driven down lot prices and land values in the past, but shrinking supply will force builders to pay more for future lots, which may pressure affordability which is already worrisome. As long as the job recovery continues, most indicators suggest 2015 will outpace 2014.
“Builder confidence in the market continues to strengthen as the market is at 2008 levels,” said Gross. “The new normal will be steady absorptions, increased construction costs and a tightened labor supply. Metrostudy expects demand to remain steady as 2015 begins. Nevada is once again to top relocation destination, and more companies are beginning to consider Nevada. The Tesla announcement earlier this year has re-energized economic development for the state.”
For information contact:
greg gross @ 916-231-9370
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
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