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.

 

Sacramento 2Q14 Housing Survey: With Prices Rising and Entry Level Product Evaporating; Builders are pulling back

Posted in Sacramento Market | Posted on 09-02-2014 | Written by Metrostudy News

 

  • While 2Q14 starts are up 2% from 2Q13, the Annual Starts rate is down 3.6% – the first decrease in the annual rate in three years
  • Average base price for new single family homes is up 8% YoY to $438k;
  • First time and Entry Level buyers are being squeezed: Home starts are shifting into the price ranges over $400k; starts of units priced under $300k have fallen substantially.

September 2014: Metrostudy’s 2Q14 survey of the Sacramento housing market showed new home starts improving as starts were up 2% from 2Q13, the first uptick after three consecutive quarters of declining numbers.  At the same time, the annual housing starts are down 3.6% from 2Q13, and closings are down 3%.  It has been three years since the market had a decrease in annual starts.

“Annual starts have been outpacing closings since 2Q12 which is indicative of increased demand,” said Greg Gross, Regional Director of Metrostudy’s Northern California market. “This increased start pace over the past year helped stabilize equilibrium.  Builders are now reacting to more seasonality and softening demand. Rather than be caught with excessive inventory, starts have pulled back.”

Our average “offer to build” base price for new Single Family detached homes is up 8% regionwide over a year ago to $438K as builders see both higher demand and increased construction costs.

“This quarter we have seen a continuation of the squeeze on entry level and first time home buyers as start activity continues to shift into the price ranges above $400K,” said Gross.  “We are seeing starts fall substantially in the range below $300K, and starts under $200k have essentially come to a halt.  This has a lot of implications for the market as home prices are increasing at a much faster pace than incomes.”

Price Shift in Housing Starts

sac

Finished inventory of housing has been steadily increasing over the past year. With 473 Finished Vacant homes, the market now has 2 months of supply, the highest level of finished homes since 2012, and a 57% increase over 2Q13. We expect to see more incentives and price adjustments as builders do not want to carry Finished Inventory.  The Sacramento market was under-supplied during the end of 2012 and beginning of 2013, but the rapid increase in standing inventory is something we will monitor closely as we finish out the year.

Lot deliveries in Sacramento California have slowed dramatically over the past few years, which has been helpful for those inventory levels.  Finished lot inventory has actually increased 11% over the past year and now stands at 13,772 and Months of Supply has increased to 57. While seemingly high, about 4,000 of these lots are in the outlying Sutter and Yuba Counties as well as within the Natomas area. This increase of lot development will make finished lots available in high demand areas. There were just over 800 new lots completed during the 2ND quarter alone. Understanding sub-market dynamics is crucial in the Sacramento Region. Metrostudy is tracking about 248,000 future lots with fewer than 7,860 lots being developed now; a fairly small number considering the size and potential demand of Sacramento California.

Metrostudy  expects demand to remain steady in 2014. However there are some indicators that point to slightly fewer new home starts compared to 2013. Primarily those being lack of lot supply, rapid price increases, and the expected increase in resale home inventory entering the market are all factors which may cause new home buyers to rethink their home-buying decisions during 2014. We expect to end 2014 with 3,000 new home starts for the year. Sacramento and the Stockton regions will likely benefit from the expanding Bay Area economy, as homebuyers seek more affordable homes outside of the Bay area.

For information contact: greg gross @ 916.231.9370
Email ggross@metrostudy.com

About Metrostudy

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 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.

 

Sacramento Housing Market Metrostudy 1Q14 Survey Results: Starts Decline Seasonally, Affordability a Rising Concern

Posted in Sacramento Market | Posted on 05-16-2014 | Written by Metrostudy News

May 16, 2014: Statewide, the Bay Area region job market remains relatively strong, and the tight labor market in the Bay coupled with drastically increasing costs might make the Sacramento area that much more attractive to home buyers as well as employers seeking more affordable alternatives. Metrostudy’s 1Q14 survey of the Sacramento housing market shows that annual housing starts are up 8% from 1Q13, while closings are up 19%. However, quarterly new home starts are down 29% from 1Q13, and quarterly closings are down 15%.

It has been 3 years since the Sacramento market has had a decrease in annual starts,” said Greg Gross, Regional Director of Metrostudy’s Northern California market. “Annual starts have been outpacing closings since 2Q12, which is indicative of increased demand. This increased start pace over the past year helped stabilize equilibrium. What we are seeing this quarter is that builders are now reacting to more seasonality and softening demand. Rather than be caught with excessive inventory, starts have pulled back.”

Meanwhile, prices are rising. Our average “offer to build” base price for new Single Family detached homes is up 8% regionwide over a year ago to $424K as builders see both higher demand and increased construction costs. Base prices are up less than half a percent compared to 4Q13, again suggesting a cooling off period.

“Start activity has shifted over last year into the price ranges above $400K as builders adjust pricing to offset increased construction costs,” said Gross. “This quarter we are seeing starts fall substantially in the range below $300K. Lot costs are increasing as lot supply dwindles. Affordability remains a concern as home prices are increasing at a much faster pace than incomes.”

Finished inventory of housing has been steadily increasing over the past year. With 478 Finished Vacant homes, the market now has 1.9 months of supply. This is the highest level of finished homes since 2012, and a 58% increase over 1Q13. We expect to see more incentives and price adjustments as builders do not want to carry Finished Inventory. The Sacramento market was under-supplied during the end of 2012 and beginning of 2013, but the rapid increase in standing inventory is something we will monitor closely in 2014.

Finished lot inventory has actually increased 8% over the past year and now stands at 13,753 and Months of Supply has increased to 57. While seemingly high, about 4,000 of these lots are in the outlying Sutter and Yuba Counties as well as within the Natomas area. This increase of lot development will make finished lots available in high demand areas. There were just over 1,480 new lots completed during 1Q14. Understanding sub-market dynamics is crucial in the Sacramento Region. Metrostudy is tracking about 262,000 future lots with fewer than 9,600 lots being developed now; a very small number considering the size and potential demand of Sacramento California.

“We expect to end 2014 with 3,000 new home starts for the year,” said Gross. “Sacramento and the Stockton regions will likely benefit from the expanding Bay Area economy, as homebuyers seek more affordable homes outside of the Bay area.”

For information contact: greg gross @ 916.231.9370
Email ggross@metrostudy.com

About Metrostudy

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 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.

11/13/12: Metrostudy 3Q 2012 Sacramento Executive Market Briefing

Posted in Events, Sacramento Market | Posted on 11-01-2012 | Written by Greg Gross

The Sacramento Area housing market has strengthened dramatically over the past year. While this is welcomed news, there are new challenges lurking on the horizon; specifically with regards to Lot Supply. Join Greg Gross at our briefing where he will discuss the Sacramento housing market and the results of our lot by lot census of new home inventory and lot supply. Additionally, he will briefly preview our new mobile platform for iPads … Metrosearch Insight

This event is limited to subscribers to Metrostudy’s Quarterly Advisory Services. If you are not a current subscriber and you wish to attend the event, please contact Greg Gross at 916-231-9370

WHEN: Tuesday, November 13th 2012 from 2:00 – 4:00 pm
WHERE: North State BIA – Ropseville, CA
INFO: e-mail Greg Gross ggross@metrostudy.com

11/07/2011: Sacramento Housing Market 3Q 2011 Metrostudy Executive Briefing

Posted in Events, Northern California Market, Sacramento Market | Posted on 10-19-2011 | Written by Greg Gross

As the housing market in Sacramento continues to evolve and take new shape in the face of decreased demand, a tight credit market, and a weakened economy, new challenges continue to present themselves.  Join us at our briefing where we will discuss the Sacramento housing market and the results of our lot by lot census of new home inventory and lot supply.

WHEN:  Monday November 7th, 2011  9:00am – 11:00am

INFO:  e-mail Greg Gross  ggross@metrostudy.com

Sacramento housing market is still searching for signs of recovery in 1Q11

Posted in Sacramento Market | Posted on 05-18-2011 | Written by Metrostudy News

(Sacramento, CA– May 1, 2011) As we enter 2011, the Sacramento market is still searching for signs of recovery from the economic downturn, 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.

This quarter marks 40 months of negative job growth for the Sacramento economy, a fact which will continue to strain the local housing market. In 1Q11, the unemployment rate for the Sacramento market is 12.7%, higher than the state level of 12%.

However, there is less troubling news in the resale market in 1Q11. As MLS listings declined over the past quarter, sales have increased. The MLS now has 3.5 months of supply of resale inventory.

There were 2,195 annual new home closings for 1Q11, a 38% decline from one year ago. Both Starts and Closings have significantly slowed. However, Closings have continued to outpace Starts, which further reduces the standing inventory levels.

Finished Vacant SFD inventory increased slightly in 1Q11, to 430, a 2.8 month supply. “This is the lowest level of Finished Vacant inventory we’ve seen since 2005,” said Greg Gross, director of Metrostudy’s Sacramento Region. “Homebuilders are waiting for a demand to return to the market. However, a quick turnaround is not likely.”

At the end of 1Q11, lot deliveries in Sacramento have slowed dramatically. The market is continuing to absorb more lots than were delivered, causing a decrease in Vacant Developed lots.

“The economic downturn will batter the California state capital well in to 2011. Some local economists have been optimistic that the market would hit the proverbial ‘bottom’ in 2008, but as we enter 2011 it appears we are still searching for signs of recovery,” said Greg Gross, director of Metrostudy’s Sacramento Region.

For information contact:
greg gross @ 925.826.3801
email ggross@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

Economic downturn will batter the Sacramento housing market well into 2011

Posted in Sacramento Market | Posted on 02-08-2011 | Written by Metrostudy News

(Sacramento, CA– February 1, 2011) The gains in the market have been reversed for the Sacramento housing market by the fourth quarter, and it appears that 2011 will not end much better off than when it began says a report released by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

This quarter marks the 38 months of negative job growth for the Sacramento economy, a fact that will continue to strain the local housing market. “Unfortunately,” said Greg Gross, director of Metrostudy’s Sacramento Region, “the stressed economy has created a growing number of potential home buyers who will need to rebuild credit before making a purchase.” The Sacramento market needs to add more than 100,000 jobs just to get back to the level of 2007.

The unemployed population for the Sacramento MSA is 12.5% through December 2010 – higher than the state level of 12.3%. Prior to the current recession, the region has not seen this level of unemployment rate since early 1993 when the rate was 9.3%.

There has been some troubling news in the resale market this quarter. Total MLS listings dropped as expected, but sales and prices remain weak. The MLS now has 4-months supply of resale inventory based on current annual sales pace. Days On Market has risen to 82; a level not seen since 2007

The economic downturn will batter the California state capital well in to 2011. Some local economists have been optimistic that the market would hit the proverbial ‘bottom’ in 2008, but now as we ended 2010 it appears we are still searching for signs of a recovery. Increasing sales volume and lower inventory seem to bring new hope to the local real estate scene, and we have seen price increases in the distressed market. The Sacramento market is poised to recover, however the timeframe seems to be stretching longer with each passing quarter. This will be a long road, and the light at the end of the tunnel has dimmed once again this quarter.

For information contact:
greg gross @ 916.231.9370
email ggross@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

Sacramento housing market showing signs of recovery, but a long road is ahead

Posted in Sacramento Market | Posted on 11-09-2010 | Written by Metrostudy News

(Sacramento, CA– November 1, 2010) The Sacramento market is showing signs of recovery but a long road is ahead, 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.

Finished Vacant Single Family inventory increased slightly in the third quarter, to 461, a 2.3-month supply, and Single Family housing inventory has declined 28% from a year ago. “New home inventory seems to be much less of a liability than it was a year ago, and homebuilders are waiting for demand to return to the market,” said Greg Gross, director of Metrostudy’s Northern California Region. “Don’t expect a quick turnaround anytime soon.”

The Sacramento economy ended September with a net job loss of 22,300 over a year ago, and nearly 15,000 fewer people are employed now than in January. “Unfortunately, the stressed economy has created a growing number of potential home buyers which will need to rebuild credit before making a purchase,” said Gross. “Sacramento is proof that the ailing national economy continues to impact the service sectors.”

Metrostudy counted 2,882 annual new home closings for the 3Q 2010, a 39% decline from the same quarter in 2009 and 80% fewer than in 2006. Closings have continued to outpace Starts, which further reduces the standing inventory levels. “Closings will likely remain flat or fall slightly for the remainder of 2010 as the weak economy continues,” said Gross.

“The concentration of government jobs in California’s state capital puts the market at risk well into 2011 for further job loss, should decreased tax revenue result in state budget cuts,” said Gross. “We are three-fourths through 2010 and still searching for signs of a recovery. The Sacramento market is poised to recover, but this will be a long road, and the light at the end of the tunnel has dimmed this quarter.”

For information contact:
greg gross @ 925.826.3801
email ggross@metrostudy.com

About Metrostudy
Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data for approximately 70% of the United States housing market, the company is recognized for its consulting expertise regarding real estate development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.

Sacramento housing market struggling to find signs of recovery

Posted in Sacramento Market | Posted on 08-16-2010 | Written by Metrostudy News

(Sacramento, CA– August 1, 2010) The Sacramento market is poised to recover, however the timeframe seems to be stretching longer with each passing quarter, 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 U.S. housing market.

“The economic downturn continues to batter the California state capital,” said Greg Gross, director of Metrostudy’s Sacramento Region. “Some economists where optimistic that the market would hit the proverbial ‘bottom’ in 2008, but now as we are halfway through 2010 appears we are still searching for signs of a recovery.”

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Sacramento housing market expected to continue to struggle

Posted in Sacramento Market | Posted on 05-17-2010 | Written by Metrostudy News

(Sacramento, CA– May 1, 2010) The economic downturn continues to batter the California state capital, according to a recent report by Metrostudy, a national housing data and consulting firm that conducts a count of 100 percent of all new housing units in subdivisions within the market area each quarter.

“Some local economists have been optimistic that the market would hit the proverbial ‘bottom’ in 2008, but now as we begin 2010 it appears we are still searching for signs of a recovery,” said Greg Gross, director of Metrostudy’s Northern California division.

“Increasing sales volume and lower inventory seem to bring new hope to the local real estate scene,” said Gross. “But we have to consider all other factors also.” Single Family Detached inventory stands at 464, a 1.9 month supply, the lowest level of Finished Vacant inventory since 2005, and 28% lower from a year ago.

“Builders continue to move standing inventory with the reluctance or ability to start new homes,” said Gross. “But don’t expect a quick turnaround anytime soon. Closings will likely remain flat or fall slightly for the first half of 2010, as the weak economy continues.” Closings have continued to outpace starts, which has reduced standing inventory levels, although with 3,542 closings in 1Q10, we see a decline of 38% from 1Q09 and 77% less than the all-time high in 2006.

“Another negative trend for the housing market: an abundance of distressed housing inventory continues to lower prices despite the increase in sales,” said Gross. The Sacramento area homebuilders have continued to drop their “offer to build” prices, resulting in more new home product priced under $300k. 39% of the homes started in the first quarter were priced below $300,000 compared to 1Q09 when 35% were priced below $300,000. The average Base Price for new homes has declined 7% from 1Q09 to 1Q10 and stands at $355K.

“This means that builders are now lowering base prices to compete directly with foreclosures and ‘short sales’, and using fewer incentives,” said Gross. “One of the more difficult challenges builders are facing now is that appraisals are coming in lower than sales price.”

MLS listing inventory for resale homes has declined to a three month supply, but this can be attributed to the abundance of distressed properties selling at reduced prices. “MLS listing inventory tends to underreport the true state of housing inventory due to a ‘Shadow Inventory’ of bank-owned homes and the pending wave of prime mortgage defaults adds greater uncertainty,” said Gross. “It seems that these trends will continue at least through first half of 2010.”